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90 seconds at 9 am with BNZ: Fed's Bernanke to keep rates low for 'extended period'; Gold, Dow, oil up; NZ$ near 81 USc; A$ near US$1.09
Bernard Hickey details the key news overnight in 90 seconds at 9 am in association with Bank of New Zealand, including news US Federal Reserve Chairman Ben Bernanke has announced the world's biggest central bank will keep its main official interest rate at an 'exceptionally low' 0% to 0.25% for an 'extended period' because the pace of the US economic recovery was only moderate and he was relaxed about a 'transitory' rise in inflation.
The Federal Reserve lowered its forecast for US economic growth this year into the low 3% range from the high 3%, citing a stubbornly weak rebound in US employment. Here is the full Federal Reserve statement.
Some celebrated confirmation of continued Federal Reserve support for the US economy and the stock market in particular, while others worried Bernanke's lack of concern about inflation would see more inflation exported globally. See more here at Bloomberg on market reaction.
The Dow was up around 0.5% in late trade, while US Treasury yields rose slightly on fears about future inflation.
The US Federal Reserve has effectively confirmed it will keep printing cheap money to devalue the US dollar and to create inflation to reduce the real value of its debts. This is exporting inflation to the rest of the world and devaluing US dollar assets held by foreigners. It is encouraging many to buy 'hard' assets such as gold, silver and arable land as a hedge against inflation.
Bernanke said in his first press conference after the statement that the 'extended period' of near zero interest rates meant for the 'next couple of meetings', which implies no rise in the Fed Funds rate until September at the earliest.
The Federal Reserve said it would end its second round of quantitative easing as planned on June 30, but would continue recycling money from maturing mortgage bonds into the US Treasury market after June 30, effectively recycling earlier rounds of money printing. See more here from Bloomberg on Bernanke's comments on bond buying.
Currencies in emerging economies and those exposed to commodity prices are rising.
The gold price surged to a record high of over US$1,530/oz and the US dollar weakened against many currencies, including the New Zealand and Australian dollars.
The New Zealand dollar strengthened towards 81 USc and is not far away from its post float highs of nearly 83 USc.
The Australian dollar rose to fresh post float highs of almost US$1.09.
Elsewhere, Standard and Poor's has warned it may downgrade Japan's sovereign credit rating after it forecast the quake and tsunami rebuild could cost Japan more than US$500 billion.
Also, inflation figures in Australia yesterday were stronger than expected, suggesting the Reserve Bank of Australia is likely to increase its Official Cash Rate with in the next 6 months. See more here at The Australian.
The Australian dollar strenghthened slightly against the New Zealand dollar on the prospects for an RBA hike before an RBNZ hike. The NZ$ dropped to under 75 Aussie cents.
The Reserve Bank of New Zealand is expected at 9am to announce it will leave its Official Cash Rate on hold at 2.5%. It is not expected to lift the OCR until December at the earliest, or maybe not until the first half of 2012.