Home' Trinidad and Tobago Guardian : October 31st 2013 Contents WASHINGTON---The Federal Reserve says the US
economy still needs support from the Fed s low
interest-rate policies because it is growing only
In a statement released yesterday after a two-day
policy meeting, the Fed says it will keep buying $85
billion a month in bonds to keep long-term interest
rates low and encourage more borrowing and spend-
It also says it plans to hold its key short-term rate
at a record low near zero at least as long as the unem-
ployment rate stays above 6.5 per cent and the inflation
outlook remains mild.
The Fed again noted that budget policies in Wash-
ington have restrained growth, but it made no mention
of the 16-day government shutdown. However, the
Fed no longer expressed concerns about higher mort-
gage rates, a concern it flagged in September.
The Fed s policy decision was approved on a 9-1
vote with Esther George, the president of the Kansas
City Federal Reserve Bank, dissenting as she has done
at each of the central bank s seven meetings this year.
At its previous meeting in September, the central
bank surprised investors and economists when it
chose not to reduce its bond buying. Since then, the
partial shutdown shaved an estimated US$25 billion
from economic growth this quarter. And a batch of
tepid economic data point to a still-subpar econo-
my.Employers added just 148,000 jobs in September,
a steep slowdown from August. And temporary layoffs
during the shutdown are expected to depress October s
Since the September meeting, mortgage rates have
fallen roughly half a percentage point and remain
near historically low levels. Over the summer, rates
had jumped to two-year highs on speculation that
the Fed might reduce the pace of its bond purchases
before the end of this year.
Few think the Fed will reduce its stimulus any
time soon. Many analysts now predict the Fed will
maintain the pace of its bond purchases into next
If the Fed does start slowing its stimulus in March,
it will have left its policy unchanged not just this
week but also at its next meeting in December and
at its subsequent meeting in late January.
The January meeting will be the last for Chairman
Ben Bernanke, who is stepping down after eight
years. President Barack Obama has chosen Vice Chair
Janet Yellen to succeed Bernanke.
Assuming that Yellen is confirmed by the Senate,
her first meeting as chairman will be in March. Many
economists think no major policy changes will occur
before a new chairman takes over.
Congress budget fight has clouded the Fed s
timetable. Though the government reopened October
17 and a threatened default on its debt was averted,
Congress adopted only temporary fixes. More dead-
lines and possible economic disruptions lie ahead.
A House-Senate conference committee is working
toward a budget accord. But wide differences separate
Democrats and Republicans on spending and taxes.
Without a deal by January 15, another shutdown is
possible. Congress must also raise the government s
debt ceiling after February 7. If not, a market-rattling
default will remain a threat.
The standoff has led economists to trim their fore-
casts for economic growth in the October-December
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Fed leaves low
The decision of the Federal Reserve
appears on a television screen on the
floor of the New York Stock Exchange
yesterday. AP PHOTO
BRUSSELS---The backlash in Europe
over US spying is threatening an
agreement that generates tens of bil-
lions of dollars in trans-Atlantic busi-
ness every year---and negotiations on
another pact worth many times
A growing number of European offi-
cials are calling for the suspension of
the "Safe Harbor" data-sharing agree-
ment, which is vital to more than 4,200
American companies doing business
in Europe, including Apple, Google,
Facebook and Amazon.
Revelations of the extent of US spy-
ing on its European allies is also threat-
ening to undermine one of President
Barack Obama s top trans-Atlantic
goals: a sweeping free-trade agreement
that would add an estimated US$138
billion (100 billion euros) a year to each
economy s gross domestic product.
Top EU officials say the trust needed
for the negotiations has been shat-
"For ambitious and complex nego-
tiations to succeed, there needs to be
trust among the negotiating partners,"
EU Justice Commissioner Viviane Red-
ing said yesterday in a speech at Yale
At the very least, the Europeans are
expected to demand that the US sig-
nificantly strengthen its privacy laws
to give consumers much more control
over how companies use their personal
data---and extend those rights to Euro-
pean citizens, maybe even giving them
the right to sue American companies
in US courts.
The Europeans had long been press-
ing these issues with the Americans.
But since former National Security
Agency contractor Edward Snowden
began to leak surprising details on the
extent of US surveillance in Europe,
the European demands have grown
"I don t think the US government
can be convinced by arguments or
outrage alone, but by making it clear
that American interests will suffer if
this global surveillance is simply con-
tinued," said Peter Schaar, the head of
Germany s data protection watchdog.
One sanction the European Union
could slap on the US would be to sus-
pend the Safe Harbor deal, which
allows American businesses to store
and process their data where they
want. It aims to ensure that European
customers data are just as safe as in
Europe when handled in the US.
By signing up for the self-reporting
scheme supervised by the US Federal
Trade Commission, US companies
gain the right to move data about their
business and consumers back and
forth between the EU and the US as
Without it, US firms would face
either a lengthy and complicated case-
by-case approval procedure by Euro-
pean data protection authorities, or a
technological nightmare of having to
ensure that European data is stored
and processed only on servers within
the 28-nation bloc. That would be
costly and in some cases impossible
---and could force US businesses to
stop servicing European customers.
EU spying backlash
threatens billions in US trade
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