U.S. stocks rose, giving the Dow Jones Industrial Average its biggest gain since July 11, as exports from China topped forecasts and corporate acquisitions fueled optimism in the world’s largest economy.
Federal Reserve Bank of San Francisco President John Williams, who has backed record stimulus, said policy sometimes may unintentionally create asset price bubbles in ways not predicted by economic models.
The Federal Reserve is buying mortgage-backed securities and has stated it will keep interest rates low until unemployment falls. The Bank of Canada under Mark Carney likewise made an explicit promise about how long rates would be held down, and Carney is now bringing this practice to the Bank of England. The European Central Bank, led by Mario Draghi, has refined how it communicates its interest- rate intentions.
Kansas City Federal Reserve Bank President Esther George, who has consistently dissented against additional stimulus, called for tapering the Fed’s $85 billion in monthly bond buying at its Sept. 17-18 meeting while cautioning that such reductions may prompt market volatility.
A government report today showing job growth was weaker than forecast hasn’t derailed economists’ expectations that the Federal Reserve this month will taper its monthly bond buying by $10 billion, to $75 billion.
Federal Reserve Bank of Minneapolis President Narayana Kocherlakota, who has backed the Fed’s $85 billion in monthly bond buying, said the central bank’s outlook for inflation and unemployment calls for more accommodation.
Americans spending more on cars and housing helped the economy maintain a “modest to moderate” pace of expansion from early July through late August, even as borrowing costs increased, the Federal Reserve said today.