Thursday, December 22, 2011

Reports: Fed could signal near zero rates into 2014, House ready to pass payroll tax cut extension

by Bill McBride on 12/22/2011 05:34:00 PM

From Luca Di Leo and Jon Hilsenrath at the WSJ: Fed Could Keep Rates Near Zero Into 2014

The Federal Reserve could signal it is likely to keep short-term interest rates near zero into 2014 or beyond ... When the Fed revises its communications approach, there is a good chance it will cease offering a fixed date for the timing of rate increases. Instead, officials could signal their intentions by publishing a range of their forecasts for rates along with their quarterly economic projections.
This change in communication strategy will probably happen at the two day January FOMC meeting on the 24th and 25th. If so, the sentence in the FOMC statement - "The Committee ... currently anticipates that economic conditions ... are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013." would be replaced with the forecast of future rates.

From the WaPo: House GOP agrees to 2-month extension of payroll tax cut
[T]op House Republicans have agreed to extend the payroll tax cut for 160 million Americans for two months, according to Democratic and Republican congressional aides. As part of the deal, Senate leaders will appoint a conference committee to negotiate a full-year tax cut after Jan. 1.
...
The measure also extends unemployment benefits for two months and averts a cut in the reimbursement rate for doctors who treat Medicare patients.
It was just a matter of when ...