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Bernanke Ponders His Course

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SINCE the Federal Reserve began raising interest rates in June 2004, the course of American monetary policy has been clear. From its low of 1%, the federal funds rate has been lifted, in quarter-point steps, at 14 consecutive Fed meetings. Alan Greenspan's dominance of the Fed's policy committee has been equally unambiguous. Now the way ahead is less obvious. America's central bank has a new captain, Ben Bernanke, several new crew members and an increasingly uncertain course to steer.

CFN466.gifThe trouble is that America's economy is sending conflicting signals. Some numbers, such as the low saving rate and the colossal current-account deficit, suggest that the economy's course is unsustainable. Despite the Fed's rate rises, overall financial conditions have remained loose: bond yields, in particular, have stayed unusually low, though they have picked up lately (see chart). The latest statistics say that while the economy is, if anything, proving stronger than expected, inflation remains surprisingly tame.

Although the housing market may be slowing, consumption is booming and companies' investment has picked up.


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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?

      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%

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