Page 25 - ARUBA TODAY

BUSINESS Thursday 6 July 2017
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Fed debating when to unwind $4.5 trillion in bond holdings

By JOSH BOAK ket left most of them com-
AP Economics Writer fortable with raising a key
WASHINGTON (AP) — The short-term rate last month.
Federal Reserve is figuring They voted 8-1 to increase
out when to start unload- the federal funds rate by
ing much of its $4.5 trillion a quarter-point to a still-
in bond holdings — a major low range of 1 percent to
turning point for an econ- 1.25 percent could lead to
omy still healing from the higher borrowing costs for
2008 financial crisis. consumers and businesses
Some Fed officials want and slightly better returns
to announce the begin- for savers.
ning of the process “within The Fed foresees one ad-
a couple of months,” ac- ditional rate hike this year
cording to minutes of the without specifying when
U.S. central bank’s June that could occur.
meeting released Wednes- Of the officials voting on
day. Others pushed for the rates, only Minneapolis
more time to first see how Fed President Neel Kash-
the broader U.S. economy kari objected.
fares during the second The minutes show Kashkari
half of 2017. was concerned that higher
What Fed officials all rates would make it difficult
agreed upon in June was for inflation to accelerate
to publicly unveil its plan from its low levels to the
to gradually reduce the Fed’s 2 percent target. The
portfolio of bonds that built Federal Reserve Chair Janet Yellen speaks in Washington. On Wednesday, July 5, 2017, the Fed- Fed’s preferred measure of
up after the Great Reces- eral Reserve released minutes from its June meeting, when it raised its key interest rate for the third inflation is tracking at 1.4
sion — which was part of time in six months. percent over the past 12
an effort to make long- (AP Photo/Susan Walsh) months.
term borrowing more af- The path of inflation going
fordable and spur growth. firm Stifel Fixed Income. ballooning in size as the balance sheet would be to forward appears to be a
The economy has now Piegza said the Fed wants Fed bought Treasury and not disrupt broader eco- source of tension inside the
reached a solid enough the market to have the mortgage bonds. nomic growth despite the Fed.
point that the Fed may time to digest the plan to By taking the bonds off the possibility of rising long-term Several Fed officials expect
look to begin unwinding its reduce its portfolio and also market, the Fed helped rates. the Fed to keep raising the
holdings at some point this an additional period for to encourage lower long- Fed officials, led by chair rate “in coming years,”
year. monitoring the economic term interest rates that Janet Yellen, appear to saying that would help sta-
“It’s very clear that the Fed data before committing to made it less expensive for have felt reasonably con- bilize inflation at 2 percent.
wants to remain vague,” a start date. consumers and businesses fident about the economy This is because a rate hike
said Lindsey Piegza, chief The Fed’s holdings have to borrow. One of the goals in June. can have an impact at a
economist at the financial surged five-fold since 2008, of gradually unwinding the The strengthening job mar- lag.q
Italy to nationalize bank, shed $32.5B in bad loans

By COLLEEN BARRY five years.
AP Business Writer The Monte dei Paschi res-
MILAN (AP) — In a bid to cue comes just a week
end years of struggles, the after the government an-
Italian government is taking nounced plans to save two
control of bank Monte dei small Veneto banks where
Paschi under a relaunch thousands of savers have
plan agreed by European lost billions of euros.
officials that includes the Italian Finance Minister
disposal of a massive 28.6 Pier Carlo Padoan said
billion euros ($32.5 billion) in Wednesday that the
bad loans. moves had “removed im-
In detailing the plan pediments to growth. We
Wednesday, CEO Marco are putting the worst be-
Morelli said that ridding the hind us.”
bank of the load of soured It is the third capital injec-
loans was “the most rele- tion in recent years for Sie-
vant issue” in the European na-based Monte dei Pas-
Commission’s approval this chi, Italy’s third-largest by
week of the rescue plan. assets, as it struggles to re-
The Italian government will cover from poor manage- Monte dei Paschi di Siena bank CEO and general director Marco Morelli, walks outside a bank
inject 5.4 billion euros into ment and a heap of bad branch, prior to a press conference, in Milan, Italy, Wednesday, July 5, 2017. The Italian govern-
the bank, giving it a 70-per- loans that compounded ment is taking control of troubled bank Monte dei Paschi di Siena and will try to relaunch it in a
cent stake, as part of a to- during Italy’s long econom- plan that includes disposing of a massive 28.6 billion euros ($32.5 billion) in bad loans.
(AP Photo/Luca Bruno)
tal boost of 8.1 billion euros. ic crisis.
Under the deal, the gov- Under the bad loan dispos- will be bundled and sold value, the vast majority to Atlante II fund, while the
ernment must exit within al plan, 26.1 billion euros
at 21 percent of gross book the government-organized bank retains 5 percent.q