Fed Poised to Mark the End of an Era / Chegou o dia. Fed vai subir a taxa de juro pela primeira vez numa década

Fed Poised to Mark the End of an Era

Long run of near-zero rates helped cut joblessness and boost U.S. growth, but weak spots linger

By JON HILSENRATH

Updated Dec. 15, 2015 4:05 p.m. ET

http://www.wsj.com/articles/fed-to-mark-the-end-of-era-1450213323?mod=e2fb

The Federal Reserve’s likely decision Wednesday to raise short-term borrowing costs will mark the end of an era of zero interest rates, a period of extraordinary policy experimentation that has yielded mixed results.

Despite the Fed’s aggressive efforts to spur the economy since the 2008 financial crisis, it’s delivered neither the vigorous expansion it wanted nor the disasters its critics feared.

WSJ rounds up who stands to benefit and lose the most whenever the Federal Reserve decides to raise interest rates.

In the process, the central bank emerged less like an all-powerful force and more like so many other institutions that have struggled in recent years to keep up with events beyond their control.

“It was in fact a period of great uncertainty and insecurity for the Fed,” the central bank’s former chairman, Ben Bernanke, said in an interview.

The Fed pinned short-term interest rates near zero for seven years and added trillions of dollars in mortgage and Treasury bonds through largely untested programs known as quantitative easing to its portfolio to lower long-term rates.

Low rates, by encouraging investment and spending, helped spark an economic expansion now 78 months old, longer than all but four expansions ever recorded. The jobless rate, at 5%, is half its recession peak and half where the rate in Europe remains. A broad measure of unemployment that accounts for discouraged workers and part-timers who want full-time jobs, has fallen to 9.9% from 17.1%; this measure is as low as it has been since mid-2008, though still elevated historically.

Output and income growth have been disappointing. In one interest-rate-sensitive sector, autos, sales are booming. In another, residential housing, a recovery has been extraordinarily slow.

After-tax incomes adjusted for inflation have expanded at a 1.8% annual rate in this expansion, slower than the average rate of 3.3% during the previous three. Had income grown at the historical rates, Americans would have had $1.2 trillion more at their disposal.

“The economy didn’t do great,” said Michael Bordo, an economic historian at Rutgers University in New Jersey. “We had a slow recovery.”

New threats now loom. A junk-bond boom is fizzling and could do broader damage to the economy. Other sectors, such as commercial real estate and auto lending, are heating up and could reverse, too. Demand for credit fueled by low rates is a common ingredient in each case.

“The faster and faster central bankers press the monetary button, the greater and greater the relative risk of owning financial assets,” Bill Gross, bond portfolio manager at Janus Capital Group, said in a December commentary on the looming rate increase.

Still, several warnings by Fed critics have proven wrong. Many expected more inflation. Instead consumer price inflation averaged 1.5% annually since the Fed pushed rates to near zero, below the Fed’s 2% goal. In October it was up just 0.2% from a year earlier, according to the central bank’s preferred gauge.

Gold prices, which tend to rise with perceived inflation risks, have fallen 21%.

In a letter to then-Chairman Bernanke in November 2010, a group of high-profile hedge fund managers and economists warned the Fed risked devaluing the U.S. currency. The dollar instead has increased 22% in value against a broad basket of other currencies since then, because the U.S. economy is doing better than many others.

Gregory Hess was an economist at Claremont McKenna College in California in 2010 and one of the signers to the letter. In 2013, he became president at Wabash College in Indiana. Low rates didn’t cause the inflation he warned of, but they did help spark a $25 million dormitory expansion and renovation project at Wabash funded in part by loans fixed at 2% for several years.

“Capital costs have been low and that is attractive,” he said. “Lots of colleges have made expansions to make their campuses more attractive. They have brought forward a lot of projects.”

Still, he said he remained worried about the risks the Fed has taken with the economy and with its own reputation. “Eight years is a long time for the Federal Reserve to be engaging in such continued activist policies,” he said, referring to the rate cuts and emergency measures taken since 2007 as the financial crisis started taking its toll on the economy.

The Fed traditionally moves interest rates up and down to try to rebalance the economy. During a recession it moves rates lower to encourage households and businesses to borrow, spend, invest and hire, spurring economic activity. During expansions it raises rates to restrain spending, investment and inflation. When it pushed rates to near zero in 2008, it took additional steps to amplify its actions, buying bonds and promising to keep rates down.

But it’s hard to judge the effectiveness of the Fed’s easy-money efforts in part because the circumstances—the financial crisis, the recession, the crashing housing market—that drove it to act in the first place were so unusual.

One example: The policies aimed to repress saving and encourage spending. Saving has risen during the expansion despite exceptionally low rates. The personal saving rate, which has averaged 5.7% of disposable income since the recession ended, exceeded the 3.9% rate during the previous expansion. This was in part due to households trying to rebuild wealth destroyed by the 2007-09 recession, one of many examples of the powerful forces the Fed was pushing against.

The jump in saving may also have been due in part to the Fed’s own low-rate policies. “Persistent low rates may have dramatically increased the cost of retirement, prompting increased savings,” say economists at UBS Securities. At an inflation-adjusted interest rate of 0.5%, a 50-year-old individual would need to save $1 million to fund a retirement that produced $3,000 a month for 30 years. If the rate were a percentage point higher, the same person would need to save $130,000 less, UBS estimated.

Fed officials have said that raising rates sooner would have increased unemployment and hit the retirement plans of households in other ways by damaging the values of assets like stocks and real estate. Interest income has been constrained, but the net worth of households in the expansion grew from $56 billion at the end of 2008 to $85 billion in the third quarter, thanks to rising stock prices and a slow recovery in home values.

Other central banks that pushed rates higher sooner had to reverse course. Sweden’s Riksbank raised its interest rate from near zero in 2010 to 2% in 2011 to slow a housing boom and rising household debt. Then inflation fell and unemployment plateaued between 7% and 8%. The central bank reversed course on rates. Its benchmark is now negative 0.35%, meaning banks have to pay to leave reserves with it.

Mr. Bernanke, in his book “Courage to Act,” held out all of Europe as an example of the alternative the Fed didn’t choose. The European Central Bank raised rates twice in 2011, but later lowered one of its key rates below zero. Its unemployment rate remains above 10%.

“The U.S. recovery is among the strongest in the world,” he said in an interview. “The only other advanced economy which seems comparable is the U.K., which had very similar policies.”

Even the Fed has had to retrace its efforts. It launched five different variations of bond purchase programs and regularly revised the guidance it gave the public about how long rates would stay low. “They kept changing their story,” said Mr. Bordo.

Fed officials say low rates, to some extent, are a force beyond their own control. Economists generally believe there is a “neutral” interest rate, driven by the demand for saving and investment, that keeps the jobless rate and inflation stable.

Fed Chairwoman Janet Yellen argued in a December speech this rate has been driven down by factors outside the Fed’s control, including weak economic growth abroad, slow worker productivity growth, aging workers, post-crisis uncertainty and tight fiscal policy. Some of these factors may abate, but others might persist, keeping rates low, despite the Fed’s desire to push them higher.

“You can’t go back to where we were before, to the interest rates we were used to, and have satisfactory growth,” said Harvard University economics professor and former U.S. Treasury Secretary Lawrence Summers, who has argued that rates are low because of outside forces causing “secular stagnation” in the economy.

Ultimately, the Fed’s easy-money policies have had risks and rewards.

Because rates on low-risk investments like Treasury bonds are so low, investors have reached to other asset classes for better returns. The Dow Jones Industrial Average is up 65% since the Fed pushed short-term rates to near zero. Commercial real-estate prices are up 93% since then, according to Moody’s.

The commercial real-estate boom is showing up right on top of a Fed branch building in Seattle. Martin Selig Real Estate, a Washington state investment firm, bought an empty six-story Fed building for $16 million from the government earlier this year. It proposes to turn it into a high rise, placing 44 levels of office and residential space on top of it, funded in part by a construction loan of $175 million to $200 million, with an interest rate set initially near 3%.

“If you have a good project, you can get funded,” Mr. Selig said.

Is the Fed finally ready to start raising interest rates? Greg Ip and John Hilsenrath discuss the risks facing the Fed and whether global developments and weak economic data could hold the Fed back.

A related risk is the debt often associated with asset booms. Debt in the household sector and financial sectors fell from 2008 peaks, but has started rising again. Business borrowing is up 25% since late 2010, according to Fed data.

Many Fed officials believe these were risks worth taking. With high unemployment early in the expansion, “if you’re not courting a little bit of risk, you’re not working hard enough,” Jeremy Stein, a Harvard professor and former Fed governor, said in an interview.

Research by University of Chicago economist Jing Cynthia Wu and Merrill Lynch economist Fan Dora Xia said the Fed’s easy-money policies pushed the unemployment rate down an extra percentage point by late 2013. A study by Fed staff found the extraordinary policies reduced the jobless rate 1.75 percentage points.

As unemployment fell, Mr. Stein, who served at the Fed from 2012 to 2014, pressed for an end to the bond buying, worried in part about risks of another bubble. Whether it actually caused one, he said, isn’t yet known.

“The full story won’t be really told until we see how this exit goes,” he said.

Write to Jon Hilsenrath at jon.hilsenrath@wsj.com

Chegou o dia. Fed vai subir a taxa de juro pela primeira vez numa década

EDGAR CAETANO / 15/12/2015, OBSERVADOR

Dia histórico. A Reserva Federal aumenta hoje a taxa de juro pela primeira vez em quase 10 anos. A primeira vez desde a crise financeira. Conheça os efeitos da decisão (e de como for anunciada).

Será desta. Quase 90% dos especialistas que seguem, a par e passo, as decisões do banco central mais poderoso do mundo concordam que a Reserva Federal norte-americana vai nesta quarta-feira anunciar a primeira subida da taxa de juro em quase 10 anos, isto é, a primeira subida desde a crise financeira. Agora, sim: a gigantesca borboleta que é a Fed vai mesmo bater as asas.

A taxa de juro foi reduzida para o mínimo histórico de 0% a 0,25% em 2008, e foi um dos desfibriladores utilizados pelas autoridades norte-americanas para reanimar a economia. Dinheiro gratuito para os bancos, para que não faltasse crédito na maior economia do mundo e para garantir que this sucker wouldn’t go down, como disse George W. Bush – ou seja, para que a economia não se espalhasse ao comprido.

Agora, com a economia a crescer a uma taxa anual de cerca de 2,5% e as bolsas perto de máximos históricos, cresceu a pressão sobre a Fed para começar a regressar a uma política monetária mais normalizada. O primeiro passo deverá vir esta quarta-feira, com uma subida da taxa de juro para 0,5%.

Há mais de um ano que os investidores mundiais aguardam este dia e há quem ache que a decisão vem tarde. O facilitismo monetário que marcou os últimos sete anos – e que agora vai começar a ser reduzido – pode ter efeitos perversos para a economia. Juros baixos durante demasiado tempo penalizam a poupança e incentivam a tomada excessiva de riscos.

Mas há, também, quem ache que a decisão vem cedo demais, porque a recuperação económica nos EUA pode não ser tão robusta quanto parece. Além disso, os céticos acreditam que, apesar da melhoria no mercado de trabalho, a taxa de inflação poderá não voltar tão cedo ao normal (está em 0,5% – o objetivo é 2%).

E mais: a Reserva Federal define política monetária para os EUA, mas toda a política monetária hoje tem efeitos globais – sobretudo no caso dos EUA. Depois dos alertas do FMI, o Banco Central Europeu (BCE) afirmou, recentemente, que se a Fed subir as taxas de juro demasiado rapidamente, as economias emergentes podem patinar e a zona euro não ficará imune.

Subida é dado adquirido. O que importa é o tom

Já é tarefa suficientemente difícil tomar as decisões de política monetária para um porta aviões como é a economia norte-americana. Mas tão ou mais importante do que as decisões que se tomam é a forma como são anunciadas e contextualizadas, pelas pistas que isso pode dar acerca das tendências futuras.

A comunicação é fundamental. Na conferência de imprensa agendada para este final de tarde (em Lisboa), a presidente da Fed “Janet Yellen vai tentar apresentar a decisão com um tom dovish“, diz Rob Carnell, economista-chefe do ING em nota de análise. Dovish significa uma maior propensão para manter ou intensificar os estímulos monetários – o oposto de hawkish, isto é, a preferência por uma política monetária mais apertada.

Mas como se pode soar dovish enquanto, na realidade, se anuncia um aumento da taxa de juro? Um aumento que simboliza que a Fed acredita que a economia está a portar-se melhor e que os riscos negativos estão controlados? Yellen “deverá sublinhar que, após esta subida, as taxas de juro irão subir devagar e que a Fed não se compromete, à partida, com um ritmo de subida no futuro” e que tudo vai depender de como a economia se comportar daqui para a frente, explica Rob Carnell.

Os economistas vão procurar certas palavras-chave no discurso de Janet Yellen, que mostrem os planos futuros do banco central. E se na leitura do comunicado preparado os riscos de mal-entendidos são menores, no improviso das perguntas & respostas, a sucessora de Ben Bernanke à frente da Fed terá de ter muito cuidado com a mensagem que passa.

Janet Yellen é conhecida por ser a clássica dove, preferindo pecar por excesso de estímulos do que por carência. Por isso, “não conseguimos imaginar que Yellen queira adotar nesta conferência de imprensa um tom hawkish. Mas estas declarações públicas não são fáceis de planear, e uma ligeira falha de comunicação ou desequilíbrio na ênfase frásica podem levar a reações significativas nos mercados”.

A decisão sobre a taxa de juro será anunciada esta quarta-feira, pelas 19h00 em Lisboa. A conferência de imprensa começa alguns minutos depois. Enquanto esperamos, deixamos o link para a peça escrita em antecipação à última reunião da Fed, que contou como uma birra dos investidores quanto às intenções do banco central fez disparar as taxas de juro da dívida de Portugal em 2013.