To the horror of financial institutions, the Fed has proposed 2 solutions, both of which would cap debit interchange at 12 cents per transaction.
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That has helped drive up long-term bond yields from 2.53% the day after the Fed's announcement to 2.8% now, precisely the opposite of what QE was meant to achieve.
And although the Fed set an inflation target of 2% in January, many Fed officials apparently expect to undershoot it between now and 2014.
On October 2, 2001 the Greenspan Fed cut the funds rate 50 basis points to 2.5% and continued cutting the rate to 1.0% on June 25, 2003 on fears of Deflation.
Traders will also be eagerly awaiting the Fed rate decision at 2:15 ET.
In a normalized GDP environment next year (not a given) nobody projects Fed funds even at 2% and 10-year Treasuries above 4%.
After emphasizing that the Fed remains committed to both sides of their mandate, Bernanke said that inflation expectations remain anchored at or near the 2% target the Fed considers adequate, and sought to differentiate monetary stimulus from fiscal stimulus.
Over the past 2 years, Fed actions appear to have had little impact on aggregate demand.
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More money in circulation means more inflation down the road, potentially a lot more than the 2% the Fed is planning on.
The Fed's No. 2 showed he was still fretting that mortgage problems could bleed into consumer loans and credit cards, which have been rising recently.
With the Federal Funds rate now at 2.5%, the Fed is effectively lending money at zero interest, based on August's 2.7% rate of inflation.
Given that the Fed has an announced inflation target of 2%, and the normal real growth rate of the economy is 3%, the Fed is widely believed to target for an NGDP growth rate of 5%.
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This measure is still below 2%, the Fed's preferred inflation rate, and thus too low.
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Still, the yield on the 10-year Treasury note, which rose in May amid jitters surrounding Fed policy, edged lower to 2.133%.
Things start to look better in 2010, where the Fed expects growth to range between 2.3% and 3.2%, with the jobless rate between 6.5% and 7.3%.
Meanwhile, Russia booked a place in the final of the women's Fed Cup competition after overturning a 2-0 deficit against Slovakia in Moscow on Sunday -- becoming the first team to ever do so.
As it stands the current policy of engaging in large asset purchases but then signaling that the Fed will keep core inflation below 2% seems to have a bit of the worst of both worlds.
Unfortunately, the people who run the Fed believe that keeping inflation below 2 percent is more important than putting people like Adkins back to work despite the fact that they have a mandate from Congress to maximize employment in addition to keeping inflation down.
Having 2.5 billion people fed by subsidised farming, with its attendant inefficiencies, is worse.
The Fed has the core PCE deflator at 2.25% to 2.5% year-over-year in the fourth quarter of 2006.
The Dow Jones industrial average close up about 56 points, having risen slightly after the Fed's statement was released at 2 p.m.
From there the trash is fed into three boilers that burn at 2, 000 degrees, heating water to create steam that spins a 60-megawatt turbine.
They conclude that America's potential growth rate averaged just 1.8% from 2008 to 2010, far below the 2.5% that Fed policymakers generally cite as the long-term trend.
Meanwhile, Petra Kvitova and Lucie Safarova gave Fed Cup champions the Czech Republic a 2-0 lead over Australia after the first day of their World Group tie in Ostrava on Saturday.
If the Fed refuses to set sail on QE 2, then her loyal passengers might complain, but at least the US will be on solid monetary ground as it tried to rebuild a viable economy.
In women's action, Petra Kvitova put the Czech Republic into the semifinals of Fed Cup on Sunday, as her 2-6 7-6 (7-3) 6-4 win over Samantha Stosur gave the two-time defending champions an unbeatable 3-0 lead against Australia in Prague.
Moreover, the Fed aims to devalue the dollar by about 2% a year, increasing prices 50% over the next 20 years.
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