To dismay investors Fed shows no sign of interest rate moves in the short term (latimes)

When the Federal Reserve has pushed its interest rate short-term key to close to zero two years earlier this week, he has done to combat a tightening of monumental credit that threatens the entire US financial system.

But this rate was supposed to be temporary - economic stimulus emergency for a real emergency and a way to keep afloat banks by sabré in their cost money, especially for the deposits of savers.

Two years later, the emergency of the financial system has elapsed. Bank failures continue to increase, but the survivors make lots of money. Banking net income totaled $ 53.6 billion in the first nine months of this year, up sharply from $ 3.2 billion during the same period in 2009, according to the Federal Deposit Insurance Corporation.

Even the emergency Federal Reserve interest rates remains in force, a painful ongoing cost of these millions of savers who cannot take the risk to spend their money in shares, bonds or other investments that may lose value.

Banks have clearly that many people try to do the right thing for their financial health by registering the most. National filings increased record 7.74 trillions of dollars at the end of the third quarter, 7% higher than the level two years earlier.

In contrast, the interest that banks paid on these deposits amounted to only $ 14.5 billion last quarter, 57 per cent less than what they put into the pockets of savers during the same period in 2008, as the credit crunch was deepening.

Last year, banks have continued to reduce the rate of overall deposit. The average annualized return on a six-month filing certificate was a mere 0.45% this week at the bottom of 0.82% last year, according to research Calabasas information services.

Even if you agree that the low interest rates were necessary to avoid economic collapse, the question now is how long this extreme sleep - or, more broadly, Eve economy grant - get banks grant.

It ends only when the Fed accepts, because Central Bank directly controls the short-term rate. When it votes to raise awareness, deposit rates will follow.

It is, of course, much more at stake here than interest income just savers. When the Federal Reserve decided finally to raise rates, it will be endorsing the idea that the economy is on a path to a semblance of normality.

But officially Fed makers showing no sign of moves their policy rates near zero, despite rising signs indicating that the economic recovery is picking up speed.

To the instruction following their last meeting 2010 Tuesday, they reiterated that they expected to keep rates at "exceptionally low levels... over an extended period."

How long "extended" is? Now, many economists believe the Fed boost rates in the short term before 2012. Some see no movement before 2013.

Ethan Harris, who leads developed markets economic research at the Bank of America Merrill Lynch in New York, expected first Fed rate hike in the fourth quarter of 2012 - complete two years later.

He noted that the Chairman of the Fed s. Ben Bernanke made clear that the Central Bank now wishes 9.8% unemployment rate, a significant decline. Before the start of the US Federal Reserve note is ready to raise rates, "They vas need to see the rate fall below 9% or maybe 8.5%," Harris said. This, he said, won't happen any time soon.

For Bernanke, then holding short-term almost from zero rates is no longer a Bank emergency, but emergency employment.

But also raises the question: is low rate really necessary for employment growth happen at this stage of recovery?

John Silvia, Wells Fargo securities of Charlotte, N.C., Chief Economist makes the case that credit costs are generally not a problem for many companies trying to decide whether to rent.

"It is more a question of companies are more confident about the final demand" for their products or services, he said.