RRJ3

Sky
Feb.19th.2010
Business Economics

Reference:
Sewell Chan (2010,February 18th). “In Surprise Move, Fed Signals Pivot to Normal Policy”. The New York Times.
http://www.nytimes.com/2010/02/19/business/19fed.html?scp=1&sq=Fed%20Raises%20Interest%20Rate%20That%20It%20Charges%20Banks&st=cse

Summary:
The federal government keeps the interest rate at the lowest point for propping up the economy until this Thursday. As the words of Swell Chan, “In surprise move, fed signals pivot to normal policy”, the step that fed had made was unexpected. The fed pushes up the charges of short-term loans. The change would not directly affect home mortgage, credit card or auto loan rates, but it shows the intension of fed that bringing back up the cheap loan rates to norm. Although the fed make an “extraordinary” step on changing the charge to the bank of interest rate, broader interest rate will not increase quickly or sharply.

Reaction:
As the economy warms back and is not anymore in the lowest point, the federal government finally takes the first step on increase the short-term loan interest rate. It is a surprise movement, but people know that the action would be taken anyway sooner or later, as lower the interest rate is part of the plan of stimulating the economy during the recession. It won’t affect the home mortgage, credit card, or auto loan rates for now. So people would not get pressure from it for living by now. But the market would be affected in some degree. According to Dennis P. Lockhart, president of the Federal Reserve Bank of Atlanta, “My point is that the public and markets should not misinterpret today’s move. Monetary policy, as evidenced by the fed funds rate target, remains accommodative. This stance is necessary to support a recovery that is in an early stage and, in my view, still fragile.” So I think people do not have to worry too much for now. The progress will be taken slowly, and the fed will give a breathe on it.

Vocabulary:
Pivot: axis, central pin around which something turns; focus, center.
Extraordinary: going beyond what is usual, regular, or customary.
Loan: money lent at interest.
Timing: the ability to select the precise moment for doing something for optimum effect.
Crisis: an unstable or crucial time or state of affairs in which a decisive change is impending.
Struggle: to proceed with difficulty or with great effort.
Mortgage: a conveyance of or lien against property (as for securing a loan) that becomes void upon payment or performance according to stipulated terms.
Necessitated: force, compel.
Unwinding: to become released from tension.
Inflict: to cause (something unpleasant) to be endure.
Bet: a choice made by consideration of probabilities
Default: a failure to pay financial debts.
Abate: release, decrease.