The open committee of the Central Bank has taken the decision of inject other $600Bn to boost American economy, that a sluggish growth during the last months. During the third quarter of the year, the GDP grew by 2%.

For that reason, the Federal Reserve, will use this money to buy federal bonds until the end of the second quarter of the next year (June 2011), what means a monthly expenditure by $75Bn.

At the same time, the Federal Reserve of New York has also announced that will reinvest interests from already bought federal bonds, so the total volume would reach between $850Bn and $900Bn. Adding this amount, monthly debt purchases would reach a maximum of $112,5Bn.

However, the Federal reserve pointed that will regularly review the purchasing rate to adjust the amount with economic needs, in order to “help the creation of employment and price stability”.

With this, the Federal Reserve leaves flexibility margins to adequate his monetary policy to the real needs of the economy. So if the economy doesn’t take off, could return to inject more money in the system. But when stating that will also watch for price stability, the Federal reserve warning that could reduce the amount injected if economy requires so.

The Federal Reserve has any news about interest rates

According the last meeting of the Federal Reserve, the interest rate will accomplish the second consecutive year in his lowest level.

As usual, the Federal Reserve stated that will keep the interest rate between 0% and 0.25% during a long period of time.

This is the conclusion that reached several members of the Open Market Committee of the Federal Reserve in his last meeting on September 21^st. According some data released this week.

In this meeting the civil servants coincided in that insert more money as measure to stimulate the economy of the United States will be “early” appropriate. This injection will arrive “earlier than the expected”.

There is a consensus in the Federal Reserve about the idea that the injection of dollars in the system can begin if the economic situation requires so.

On the last September 21^st the Federal Reserve kept interest rates in the United States steady at his current range of 0-0.25% and showed that is willing to take new stimulus measures if needed.

That statement is according with the perception of the members that these measures could be early appropriate, but also pointed that these decisions depend on future informations about the evolution of economic situation.

The Federal reserve said what uses to say

The members of the Federal reserve reiterated that although most members think that the recession is unlikely to return, a lot of them showed his concerns on the growth of production and the process associated with the creation of employment, that will be slow for a certain period of time.

About the economic recovery of the United States, the members of the Federal Reserve believe that economic growth will get stronger during the next year.

In his last meeting, the Federal Reserve also considered the possibility to take more stimulus measures “if economic growth continues being too weak to successfully reduce unemployment rate. The Federal Reserve could take measures such buy more long run bonds and some measures to handle inflation.

Ben Bernanke announced his next steps during the central banks governors meeting,hold in Jackson Hole (Wisconsin),just the day when the United States revised the GDP growth during the second quarter, than has been lower than the expected.

The GDP of the United States grew now by 1,6%, in front of the 2,4% considered in a beginning. However,the reduction was lower than the expected by analysts, that foreasted a GDP growth by 1,4% .

Ben Bernanke admitted that the recovery is “far to be complete” and the return to growth is “less vigorous than we expected “. According the Federal Reserve, this bad behavior is due to the weak real state market, affected by the fact that the household demand is growing with less strenght than the expected. Last week we could know that July household sales in The United States were reduced by 12,4% respect the month of June.

However, due to a lower recovery speed, the president of the Federal Reserve discarded a new entrance in the recession by the United States. “the conditions for the recovery of 2011 continue standing” and the Federal Reserve “has tools to give additional stimulus”.

The Federal reserve can not alone

However, Ben Bernanke asked for help from governments. “the steady growth will require effective and appropiate actions from the governments and the private industry. Central bankers , alone, can’t solve all economic problems of the world”, warned Ben Bernanke.

Ben Bernanke believes that there isn’t “deflation risk”, but says that the Federal Reserve can fight it.

In case of necessity of further stimulus, the Federal Reserve plans to implement a expansive monetary policy, mainly buying long therm public bonds. However, these operations must be analyzed well to compare expected profits with the potential risks and costs.

Ben Bernanke anticipated that the Federal Reserve can also lightly modify his communications about interest rates, pointing that money price will continue low not just by a long period “We can say that prices will we lower more time than what markets are discounting”, pointed.

Ben Bernanke discarded that the United States were going to register deflation (general fall in prices), possibility that concerns investors. Sun Won Sohn, professor of the California State University, said that we can’t doubt about the existence of unrest. Ben Bernanke doesn’t see it so fair. “there aren’t risks” but, if some evidence was produced,the Fed would fight it and offer a “strong resistance”.

For the analysts of Goldman Sachs, the words of Ben Bernanke allow to see the “measures”that could adopt the Federal Reserve, although his general tone has been to watch and stay for the evolution of the economy.

Para los analistas de Goldman Sachs, las palabras de Bernanke permiten ver las “directrices” que puede adoptar la Fed, pese a que su tono general haya sido el de “ver y esperar” a ver cómo evoluciona la economía.

The Federal Reserve hasn’t changed any coma of his habitual speech, at the end of the meeting began yesterday, the Federal reserve decided to keep the price of money steady in his historical minimum one more month. Since December of 2008, the interest rates of the United States remained between 0% and 0.25%.

Furthermore, the Federal Reserve reiterated that interest rates will remain in a low level “during a period of time”, repeating the same words that some are voices are demanding to be suppressed from communicates. However, the members of the open committee of the Federal Reserve are defending that the forecasts point that these measures are necessary to help promote the economic and labor recovery, so as price stabilization.

About the economic Landscape, Bernanke and his team highlighted that continued recovering and pointed that he labor market is beginning to give live signals, when improving respect his last meeting. However, the Federal Reserve reiterated that the recovery will be “provably moderate for a time”, but hopes a gradual improvement of the usage of economic resources.

The activity began past Wednesday when the meeting of the Federal Reserve ended. The Federal reserve did not change his speech, and although the weak signals of recovery, is still likely to keep interest rates between 0% and 0.25% during a long period of time.

The other central bank, among the biggest economies in the world, that has gone further with his policy of 0 interest rates, the one of Japan. Isn’t likely to keep this policy too. After his last meeting decided to double his liquidity program for the financial system to surpass $220.000 million.

The cross among the Yen and the Dollar remained steady yesterday, with a growth by 0.06% of the Japanese currency. At the same time, the dollar is paying the fears of inflation. The data about production prices in February was released yesterday with a growth by -0.6%. The analyst’s forecasts estimated this by no more than -0.2%.

The Euro hasn’t been able to take a fair advantage from the situation of the Dollar. The currency has just been able to keep the gains obtained after the aids promised to Greece, and now an Euro has a value of 1.38 Dollars.

The pound is the luckiest currency this week, investors ended to speculate low thanks to the lowest demand of unemployment subsides in the United Kingdom since 1997. The hope of recovery on British Economy o pushes the pound by 0.52% to 1.532 dollars per pound.

“When your interest rate is permanently at 0, you are inviting future problems. We know that the 0 isn’t sustainable…the market knows it”, stated Hoenig.

Furthermore, the regional president of the Federal Reserve, stated that the Central Bank of the United States must be ready to increase interest rates although having high unemployment rates.

Hoenig has been positioned as of the the falcons in the Federal Reserve. He appeared in the act of the last meeting of the Federal Reserve, released on February 17th ; asking for a important change on the Federal Reserve’s official message: instead of saying that the interest rates will be low “during a long period of time” say “at the moment”.

This message arrives after Ben Bernanke, president of the Federal Reserve, stated last Wednesday that the interest rates in the United States would remain low during a long period of time.

Bernanke, tried to change the market that way, after the message by the Federal reserve two weeks before, when announced the increase of discount interest rates: what banks pay when they have an emergency of liquidity.

In declarations took by Bloomberg, Levy estimates that “it is time to normalize things”, after the Federal Reserve began to trim the interest rates when lending money to the banks in the beginning of the financial crisis at the end of 2007. The economist points that this movement “doesn’t represent too much, because any bank in a situation without crisis will go to the discount office if doesn’t have problems”.

On Thursday, the Federal Reserve increased for first time since June 2006 the discount interest rates given to the banks with need of liquidity to obtain short therm financement by an increase of 0.25% to the rate of 0.75%.

The Federal Reserve will go further

“The Federal Reserve, during the financial crisis, lowered the discount interest rates to increase the liquidity in the system”, highlights Levy. The expert points that “now we must retreat the aids to obtain liquidity, given that we aren’t in the financial crisis”. For that reason, Levy points that “It’s normal the movement to the normality in the difference among the general interest rate and the discount interest rate”.

Levy assured that central banks will increase the federal interest rates “when they be convinced of that the economic recovery is sustainable”. Since December 2008, the interest ratel is in his

lowest level in all the History, among a 0% and a 0.25%

The people against Ben Bernanke, some afraid of his reelection and some disagree with what the Fed done with the financial crisis, moved against him, enlarging the list of negative votes already revealed.

Democrat senators Barbara Boxer (California) and Russ Feingold (Wisconsin) said that will be against the reelection of Ben Bernanke, that should be before the January 31st.

Ben Bernanke needs 60 votes to ensure his reelection, due to the blocking system of the chamber. Donald Kohn, vicepresident of the Federal Reserve, would be the interim chief of the bank is reelection of of Ben Bernanke is postponed.

Other names that circulated as alternatives for the presidency of the Federal Reserve, include Kohn himself, Lawrence Summers, the economic assistant of the president, and Alan Blinder, the economist of the Princeton University.

The assessors of the White House and the Treasure, Rely on that Ben Bernanke will be confirmed by the senate, when will be accomplished five months since the president of the United States announced his nomination.

Before the vote of Harry Reid, democrat leader of the Senate, seemed to be doubting, but said that ‘”Although I will vote for, my support isn’t unconditional”

Some economists warned that rejecting Ben Bernanke could be seen as a threat to the independence of the Federal Reserve. So and the shares falled by 2%.

A “No” to Ben Bernanke could be seen by the markets as a sign of uncertainty. Chris Dodd, the president of the Banking comittee of the Senate, said that a ”No” to Ben Bernanke for answer t would leave the economy in a sharp fall.

According the Washington Post , this is the highest profit obtained by the federal reserve in their 96 years of history. The entity presided by Ben Bernanke, surpassed the analyst’s forecasts from the Bank of America, Goldman Sachs and JP Morgan, and has made it thanks to the aggressive bond purchases last year. His previous record was of $34.600 million in 2007.

At the end of 2009, the Federal Reserve was controlling $1800 billion in debt from the US Government. This figure surpasses widely the $497000 million of 2008.

Although closing 2009 with record profits, Diane Swonk, chief economist from Mesirow Financial, warned that these results expose the Federal Reserve to higher risks, “they have elevated the risks curve, given that they have longer therm assets and more issues related with credit risk”,pointed.

So, the Federal Reserve could lose money if the price of Treasure Bonds or these values related with mortgages from Fannie Mae and Freddie Mac decrease during upcoming years and the executives from the Federal Reserve opted for drain liquidity from the system with the sale of assets.

On the other side, the president of the Federal Reserve, Ben Bernanke, obtained a slight improvement in his income for 2010 and his salary will be up to $199.700 without Bonuses.

This way, the Federal reserve showed that although the last report this November, is worried about the unemployment rate. However the bankers of the Federal Reserve state that they will need more than a good report to confirm the evidence that the labor market is recovering.

The hottest discussion between the officers of the Federal Reserve was about the forecast on inflation rate. So, some members of Federal Reserve’s open committee see low risk on the increase of prices due to the low interest rate, although they recognize that it’s important ”to stay alert” in front of possible risks.

On the other side, some members of the Federal Reserve believe that the increase on prices experimented by some raw materials could boost the inflation, a situation that could lead to higher interest rates although further improvements on the labor market.

The risk of the emergency package withdrawal

On this point of view, a civil servant of the Federal Reserve pointed in the last meeting hold on December, that the improvements of the financial markets and the economy, could ensure the withdrawal of the asset purchases and the sale of these across time. While others, are keeping that the economic recovery is still weak to withdraw the emergency packages and they bet for extend the asset purchase.