October 12, 2010

Emerging Market Equity Fund Inflows Exceed $6 Billion in Week, EPFR Says

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Emerging Market Equity Fund Inflows Exceed $6 Billion in Week, EPFR Says

Overseas investors pumped the most cash into emerging-market equities since late 2007 in October and Asia bond funds attracted more capital on further signs growth in developed nations is slowing, according to EPFR Global.

The equity funds received net inflows of more than $6 billion in the week ended Oct. 6, the biggest amount in 33 months, the Cambridge, Massachusetts-based research company said in an e-mailed statement. Investors added $1.1 billion to funds dedicated to emerging-market debt, it said. They took out $3.2 billion from U.S. stock funds, the most in five weeks.

Inflows are breaking records since EPFR started tracking the data in 1995 on speculation central banks will join Japan’s monetary easing, releasing more capital that can be invested in higher-yielding assets. The Bank of Japan cut its benchmark interest rate to near-zero on Oct. 5, while the European Central Bank yesterday left borrowing costs at 1 percent, unchanged since May 2009.

“Liquidity is really ample, driving equities higher,’ said Chu Moon Sung, a fund manager at Shinhan BNP Paribas Asset Management Co. in Seoul, which manages about $28 billion. Rate policies “should continue to boost asset prices and money inflows into emerging countries will continue.”


Keeping His Promise, Bernanke Says Fed “Will Do All That It Can” To Boost Economy

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Keeping His Promise, Bernanke Says Fed “Will Do All That It Can” To Boost Economy

The U.S. economy “remains vulnerable to unexpected developments” and growth is “less vigorous than we expected,” Ben Bernanke said Friday at the Fed’s annual Jackson Hole confab.

As a result, the Fed “will do all that it can” to support the economy, he said, including “provide additional monetary accommodation through unconventional measures if its proves necessary.”

At the top of Bernanke’s ‘tool box’ are “additional purchases of longer-term securities,” including Treasuries and mortgage-backed securities.

In sum, Bernanke defended the Fed’s Aug. 10 decision to start buying Treasuries again and pledged to do more, if necessary, to boost the economy.

December 18, 2009

Fed To Leave Rates Low For ‘Extended Period’

Fed To Leave Rates Low For ‘Extended Period’


WASHINGTON — The Federal Reserve pledged Wednesday to hold interest rates at a record low to drive down double-digit unemployment and sustain the economic recovery.

The Fed noted that the economy is growing, however slowly. And turning more upbeat, it pointed to a slowing pace of layoffs.

Still, Fed Chairman Ben Bernanke and his colleagues gave no signal that they’re considering raising rates anytime soon. They noted that consumer spending remains sluggish, the job market weak, wage growth slight and credit tight. Companies are still wary of hiring, they said.

Against that backdrop, the Fed kept its target range for its bank lending rate at zero to 0.25 percent, where it’s stood since last December. And it repeated its pledge, first made in March, to keep rates at “exceptionally low levels” for an “extended period.”

In response, commercial banks’ prime lending rate, used to peg rates on home equity loans, certain credit cards and other consumer loans, will remain about 3.25 percent. That’s its lowest point in decades.

Super-low interest rates are good for borrowers who can get a loan and are willing to take on more debt. But those same low rates hurt savers. They’re especially hard on people living on fixed incomes who are earning measly returns on savings accounts and certificates of deposit.

Noting the stabilized financial markets, the Fed said it expects to wind down several emergency lending programs when they are set to expire next year. That seemed to strike a confident note that the Fed thinks it can gradually lift supports it provided at the height of the financial crisis.

The central bank made no major changes to a program, set to expire in March, to help further drive down mortgage rates.

The Fed in on track to buy a total of $1.25 trillion in mortgage securities from Fannie Mae and Freddie Mac by the end of March. It has bought $845 billion so far. It’s also on pace to buy $175 billion in debt from those groups under the same deadline. So far, the Fed has bought nearly $156 billion.

Its efforts to lower mortgage rates are paying off. Rates on 30-year loans averaged 4.81 percent, Freddie Mac reported last week. That’s down from 5.47 percent last year.

The Fed said it has leeway to hold rates at super-low level because it expects that inflation will remain “subdued for some time.”
Fed policymakers repeated their belief that slack in the economy — meaning plants operating below capacity and the weak employment market — will keep inflation under wraps.

A government report out Wednesday showed that inflation is in check despite a burst in energy prices. Energy prices, however, are already in retreat.

Bernanke, who’s seeking a second term as Fed chief, has made clear his No. 1 task is sustaining the recovery. Last week, he and other Fed officials signaled they are in no rush to start raising rates.

At the same time, Bernanke has sought to assure skeptical lawmakers and investors that when the time is right, he’s prepared to sop up all the money. Some worry that the Fed’s cheap-money policies will stoke inflation.

Some encouraging signs for the economy have emerged lately. The economy finally returned to growth in the third quarter, after four straight losing quarters. And all signs suggest it picked up speed in the current final quarter of this year.

The nation’s unemployment rate dipped to 10 percent in November, from 10.2 percent in October. And layoffs have slowed. Employers cut just 11,000 jobs last month, the best showing since the recession started two years ago.

Still, the Fed predicts unemployment will remain high because companies won’t ramp up hiring until they feel confident the recovery will last.

Consumers did show a greater appetite to spend in October and November. But high unemployment and hard-to-get credit are likely to restrain shoppers during the rest of the holiday season and into next year.

-Financial Post-

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