With the rate already at 0-0.25% the focus will not be on whether they will or won’t cut (no change is expected) but the wording of any statement releases. It is likely that the focus will shift to the quantitive easing [...]]]> All eyes will be on the FOMC meeting today at 7.15pm this evening GMT.

With the rate already at 0-0.25% the focus will not be on whether they will or won’t cut (no change is expected) but the wording of any statement releases. It is likely that the focus will shift to the quantitive easing measures that the Fed could use to stimulate the economy.

Particular reference is likely to be made to the three key tools Mr Bernanke outlined in his speech in London on 13 January: credit easing, lending for financial institutions and buying of longer term assets.

It is thought that the Federal Deposit Insurance Corp. (FDIC) may manage a so-called “bad bank” that the Obama administration is likely to set up in an effort to help ailing US banks. The aim is to buy up poor assets on banks’ balance sheets.

Plans are expected to be announced early next week. This will, no doubt, place pressure on the UK to come out with a similar package.

Yesterday saw Mandelson announce a £2.3bn support package for the UK’s ailing car industry. This financial support will be given on a case by case basis to support training schemes for employees, help out car part suppliers and give grants for ultra low carbon car research and development.

The bailout plans that are being announced will create more reasons for free-market economists to voice their concerns and begs the question coined on the front page of a city paper this morning: “First Banks, Now Cars, What next?”

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However, the Federal Reserve chairman said the risks to both inflation and growth had increased in the past few weeks and the US central bank would be flexible [...]]]> Ben Bernanke challenged market expectations of early US interest rate cuts on Wednesday, saying he remained comfortable with rates on hold in spite of recent adverse economic data.

However, the Federal Reserve chairman said the risks to both inflation and growth had increased in the past few weeks and the US central bank would be flexible in responding to future economic news.

Mr Bernanke told the joint economic committee of Congress: “To date the incoming data have supported the view that the current stance of policy is likely to foster sustainable economic growth and a gradual ebbing in core inflation.”

The Fed’s recent policy statement – which baffled markets when it was released a week ago – was not intended to signal that the Fed now had a neutral policy stance, he said.

“I want to emphasise that we have not shifted away from an inflation bias,” he said.

Mr Bernanke said changes to the Fed statement were intended to give it greater scope to respond quickly if the outlook for either growth or inflation deteriorated significantly. “We are looking for a bit more flexibility given the uncertainty we face.”

Mr Bernanke also brushed aside comments by Alan Greenspan, his predecessor, that the expansion looked to be ageing, raising the possibility of a recession. Expansions did not “die of old age”, he said.

Mr Bernanke played down the threat from the subprime mortgage market and highlighted a new risk to growth from weak business investment. His comments came as the Department of Commerce released figures showing that durable goods orders bounced back weakly in February after a plunge in January.

“The possibility that the recent weakness in business spending will persist is an additional downside risk,” he said.

The Fed chairman hinted that the weakness had been a surprise: “The magnitude of the slowdown has been somewhat greater than would be expected given the normal evolution of the business cycle.”

But he added: “Despite the recent weak readings, we expect business investment in equipment and software to grow at a moderate pace this year.”

He was less alarmed than many investors by the distress in the subprime mortgage market.

“At this juncture…the impact on the broader economy and financial markets of the problems in the subprime market seem likely to be contained,” he said.

He recognised the risk that the housing market correction “could turn out to be more severe than we currently expect, perhaps exacerbated by problems in the subprime sector”. Overall, he indicated that the US central bank remained relatively upbeat about prospects for growth.

He said consumer spending “has continued to be well maintained so far this year” and said consumption “should continue to support the economic expansion in the coming quarters”.

Mr Bernanke added “the economy appears likely to continue to expand at a moderate pace over the coming quarters”.

He reiterated a series of reasons for the Fed to remain concerned about inflation. “The high level of resource utilisation remains an important upside risk to continued progress on reducing inflation,” Mr Bernanke said.

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While the Federal Open Market Committee statement on Wednesday was carefully worded, stirring debate about its meaning, the equity market’s response was unequivocal.

The [...]]]> Hints that the Federal Reserve was no longer biased towards raising interest rates sparked a strong rally on Wall Street this week, raising investors’ hopes that the recent slump had run its course.

While the Federal Open Market Committee statement on Wednesday was carefully worded, stirring debate about its meaning, the equity market’s response was unequivocal.

The S&P; 500 index bounced back into positive territory for the year with its biggest weekly rise in four years. The rally pushed the benchmark index above its 30-day moving average, an encouraging technical sign for bulls.

The S&P; closed 0.1 per cent higher at 1,436.11, its fifth successive day of gains that put it up 3.5 per cent on the week. The Dow Jones Industrial Average rose 0.2 per cent on Friday to 12,481.01.

The recovery came as Blackstone, the buy-out group, prompted reflection on the recent private equity boom by filing for an initial public offering to raise $4bn.

Energy stocks made the biggest gains this week, buoyed by both rising oil prices and broad strength in equities. The S&P; Energy index stands at its highest point since December, 17.3 per cent above its low for the year.

Exxon stock surged 7.4 per cent to $75.02 this week, while Chevron rose 8.3 per cent to $73.70. The odd one out in the sector was Halliburton, the oil services group, which slid 3.1 per cent to $31.08 after warning about weak US demand.

Homebuilders began to make headway on the back of sound housing data. Sales of existing homes and housing starts were both in excess of depressed expectations.

Concerns about tighter mortgage lending standards hitting demand for homes checked the gains. The S&P; Homebuilders index rose 2.4 per cent this week, but remains more than 20 per cent off its high for the year.

Loans Calculators Blog- loans rates blog for news about interest rates- unsecured and secured loans, mortgages, remortgages and refinancing including home loans, equity release and debt consolidation.

On that note, [...]]]> The FOMC meeting on Wednesday and the accompanying statement are likely to be the focus for financial markets this week. Expectations remain for the Fed to leave rates on hold at 5.25% although some anticipate the statement may offer acknowledgement of softer growth and perhaps trouble in the sub prime lending sector.

On that note, this weeks U.S housing data on Tuesday & Friday, will be of particular interest in light of the recent focus on the faltering sub prime market.

In the UK a number of important releases are scheduled this week. Tomorrow the annual CPI Inflation is expected to fall slightly to 2.6% from the previous 2.7%. Wednesday sees the Bank of England minutes from the March meeting released, where most analysts are expecting no members voted for a hike.

Hopefully the minutes will shed some light on whether it is now a minority of members who feel the risks are consistently high enough to warrant a further hike this year. On Wednesday the Chancellor of the Exchequer will deliver his budget statement. Finally UK Retail Sales for February will be released on Thursday. After the January sharp fall this is forecast to rebound in the region of 0.8% putting the annual figure somewhere in the region of 4.0%

In Japan the Bank of Japan begin their two day meeting today and forecasts are unanimous that tomorrows outcome will leave the target rate on hold at 0.5%. This places the focus on Governor Fukui’s subsequent speech and the BoJ’s monthly report which will both be closely monitored for signals of future rate hikes.

For those with an interest in or an exposure to China the Peoples Bank of China announced a 27bp hike in both the benchmark lending and interbank deposit rates on Saturday. The move was widely expected after the PBoC Governor said CPI had become worryingly high.

In the short term the stock market may not react well to the hike, but on the currency front pressure on the CNY appreciation will probably intensify. This is now the third time the Central Bank has raised interest rates since last April.

Loans Calculators Blog- loans rates blog for news about interest rates- unsecured and secured loans, mortgages, remortgages and refinancing including home loans, equity release and debt consolidation.