UK Recession 'worse than estimated'

Recession 'worse than estimated'

Kanselir Alistair Darling akan mengatakan dalam Anggaran pra-laporan bahwa perekonomian pada tahun 2009 dilakukan lebih buruk daripada yang diperkirakan pertama, Treasury sumber mengatakan.

Mr Darling diharapkan untuk mengatakan bahwa ekonomi Inggris menyusut dari 4,75% tahun ini - lebih dari 3,5% perkiraan semula dalam Anggaran pada bulan Maret.
Penyesuaian mengikuti perekonomian tak terduga kinerja yang buruk dalam tiga bulan pertama tahun ini.Tapi dia cenderung memprediksi bahwa pertumbuhan tetap hingga 2010 perkiraan pertumbuhan antara 1-1,5%.

Kembali ke pertumbuhan

Pada hari Kamis, Mr Darling mengatakan bahwa sejak prakiraan Anggaran dibuat, "data baru telah menunjukkan bahwa kebanyakan ekonomi, kami termasuk, menderita pukulan hebat pada kuartal pertama tahun ini".

Dia menambahkan bahwa ia masih diharapkan kembali ke pertumbuhan sekitar pergantian tahun.

Ekonomi Inggris telah mengalami kontraksi selama enam kuartal terakhir, tetapi ekonomi AS, Jepang, Perancis dan Jerman mulai tumbuh lagi.

Angka ekonomi Inggris baru-baru ini, seperti penjualan ritel dan output manufaktur, telah menunjukkan tanda-tanda pemulihan. Penjualan ritel bulan Oktober naik 0,4% dari September, menurut Kantor Statistik Nasional. Dan terbaru Manajer Pembelian Indeks manufaktur menunjukkan peningkatan produksi pada tingkat yang paling cepat selama hampir dua tahun di bulan Oktober.

Dollar Gain Oleh Kekhawatiran

Analisa Fundamental 30 November 2009


Dollar Gain Oleh Kekhawatiran Dubai ; yen retreat dari 14-tahun tertinggi

Dolar naik terhadap euro dan sejumlah mata uang utama pada hari Jumat karena kekhawatiran tentang kemungkinan default utang Dubai mendorong safe haven the greenback’s.

Namun dolar kehilangan beberapa momentum setelah yen retreat dari 14 tahun tertinggi versus the greenback tinggi oleh anjloknya pasar ekuitas AS. Rendahnya volume perdagangan sehari setelah liburan Thanksgiving AS pada hari Kamis sedikit membatasi pergerakan, kata para pedagang.

Dubai pada hari Rabu mengatakan pihaknya akan meminta kreditor dari dua perusahaan, termasuk konglomerat Dubai World, untuk pembekuan terhadap pembayaran utang sebagai bagian dari restrukturisasi.

“Setiap kali ada situasi di mana para pedagang tidak yakin tentang bagaimana lingkungan politik atau ekonomi akan berjalan baik, seperti Dubai, mereka selalu menjual dan bertanya kemudian,” kata Kathy Lien, direktur riset mata uang di GFT Forex di New York . ” US dolar dan yen Jepang adalah penerima terbesar penjualan ini.”

Potensi besar dari berita ini, diukur oleh utang, Dubai World’s sebesar $ 59 miliar mengguncang pasar pada keprihatinan terhadap penyakit menular dalam sektor perbankan, tetapi pemulihan di Amerika Serikat dan Eropa menyarankan beberapa investor saham diharapkan tidak akan menggagalkan pemulihan.
ICE Futures US dollar index, ukuran nilai the greenback terhadap enam mata uang utama, naik 0,3 persen di 75,032, karena telah naik sekitar 1 persen sebelumnya

Review market 10 November 2009

Review market
10 November 2009


Perdagangan di pasar valuta, pada awal pekan ini (09/11/09) Dollar di tutup melemah cukup tajam terhadap seluruh mata uang utama dunia. Index dollar kembali menyentuh level terendah 74.94, dimana di buka pada level 75.58 dan di tutup pada level 75.02

Bayang suram ekonomi US tercermin pada tingkat pengangguran yang terus bergerak massive, merupakan masalah serius terhadap perekonomian. Meningkatnya jumlah pengangguran akan melemahkan daya beli masyarakat sehingga perekonomian akan semakin melemah dan akan tercermin pada melemahnya permintaan terhadap barang dan jasa, dan hal ini akan berpengaruh terhadap sektor manufaktur dalam negeri.

Sektor manufaktur selain mendapat tekanan dari dalam negeri, juga mendapat tekanan dari barang-barang import, makan perlu campur tangan pemerintah, sehingga pertemuan G20 kemarin tetap pada kebijakan semula, yaitu pemerintah masih tetap pada kebijakan stimulus. Rendahnya petunjuk dari data-data terhadap Amerika malam tadi, menekan dollar yaitu pasar merespon data tingakat pengangguran yang melonjak diluar perkiraan analis.

EUR kemarin terpantau menguat cukup tajam, kembali bergerak diatas level 1.5 dimana permintaan terhadap mata uang ini kembali terjadi setelah negatifnya sentimen terhadap Amerika dan dirilisnya data eropa yang cukup baik. Antara lain; tingkat kepercayaan konsumen, data industrial production yang juga mengalami kenaik menjadi 2.7% dari 1.8% namun terjadi penurunan dalam neraca perdagangan surplus, yaitu menjadi surplus 9.9 milyar dari 10.6 milyar.

Sementara itu pinjaman rumah di Australia naik tajam dalam enam bulan terakhir, sehingga memperkuat keputusan bank sentral untuk menaikan sukubunga pekan lalu untuk kedua kalinya dalam sebulan.Survey dari Bloomberg menyatakan sebanyak 17 ekonom memperkirakan kaiakan sebasar 3%. Meningkatnya peijaman rumah pada masa pemerintahan PM Kevin Rudd ini menambah signal peningkatan ekonomi yang akan mendorong Gubernur Bank Central Glenn Stevens untuk menaikan sukubunga pinjaman di bulan ketiga pada tanggal 1 Desembe mendatang, demikian menurut analis yang di survei Bloomberg.

Pekan Lalu Bank Central mengatakan ekonomi akan tumbuh 3kali lipat pada tahun ini sesuai dengan perkiraan bulan agustus. Stevens mengisaratkan resiko yang akan terjadi dalam pasar perumahan, berkaitan dengan naikanya sukubunga pinjaman.

Sementara itu fokus hari ini diwarnai oleh data-data dari eropa dan jepang. namun untuk US minim data yang dirilis. sehingga diperkirakan Dollar masih dalam tekanan jual. Disamping itu kemarin Greenspan mengapresiasi kenaikan harga di bursa saham yang dinilai telah kembali normal, selain itu beliau juga mellihat reboundnya harga rumah memberikan harapan akan meredanya gelombang penyitaan. dari pernyataan greenspan tersebut setidaknya memberikan suatu harapan di tengah suramnya pasar tenaga kerja.

Pasar bursa mendapatkan ketenangan setelah G20 tetap pada komitmenya untuk melanjutkan kebijakan stimulus ekonomi, yang berarti pemerintah tidak akn tinggal diam terhadap permasalahan yang dihadapi korporasi
Sementara itu the Fed mengisaratkan tingkat Sukubunga hingga kuartal pertama 2010 diprediksikan akan tetap berada pada level rendah.

Minyak pada perdagangan malam tadi ditutup menguat, dibuka pada level 77.82 dan di tutup pada 79.18. Minyak naik akibat melemanya Dollar, dimana para pemegang uang di luar dollar memandang minyak murah sehingga meingkatkan minat beli. Menurunya nilai tukar Dollar terhadap Euro dalam dua minggi terakhir memberikan dampak psikologis terhadap trend penguatan.

Payrolls Probably Declined at Slower Pace; Unemployment Rose

Aug. 7 (Bloomberg) -- A slowing in the pace of U.S. job losses last month wasn’t enough to prevent the unemployment rate from climbing to a 26-year high, economists forecast a report today will show.

Employers probably cut 325,000 workers from payrolls in July after trimming 467,000 the prior month, according to the median of 82 estimates in a Bloomberg News survey. The unemployment rate likely rose to 9.6 percent from 9.5 percent.

Companies from Boeing Co. to Verizon Communications Inc. continue to cut costs, signaling that a rebound in hiring will take time to develop even as Obama administration stimulus efforts take hold. A jobless rate that is projected to exceed 10 percent by early 2010, stagnant wages and falling home values mean a lack of consumer spending will curb an economic recovery.

“The labor market is still bad,” said Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts. “Projects that create jobs will take a long time to ramp up. People are resigned to the idea of a jobless recovery and expectations for the consumer are really low.”

The Labor Department’s report is due at 8:30 a.m. in Washington. Economists’ forecasts for payrolls ranged from declines of 150,000 to 460,000. Job losses peaked at 741,000 in January, the most since 1949.

The July projection would bring total jobs lost since the recession began in December 2007 to 6.8 million, the biggest decline in any post-World War II economic slump.

Unemployment Forecasts

Estimates for the unemployment rate ranged from 9.2 percent to 9.8 percent, according to the survey. A separate Bloomberg survey last month showed unemployment may exceed 10 percent by early next year and average 9.8 percent for all of 2010.

The Standard & Poor’s 500 Index, which reached a 12-year low on March 9, has since climbed 47 percent as evidence mounted the recession was easing.

Declining pay is one reason economists project consumer spending, which accounts for 70 percent of the economy, will be slow to gain speed. Wages and salaries fell 4.7 percent in the 12 months through June, the biggest drop since records began in 1960, according to Commerce Department data issued this week.

Companies like Verizon and Boeing are still looking to trim expenses through cutbacks in staff. New York-based telephone carrier Verizon last month said it plans to slash more than 8,000 jobs in the second half of the year.

10,000 Jobs

Chicago-based Boeing, which is planning to eliminate about 10,000 workers, or 6 percent of its labor force, has agreed to allow some machinists to volunteer for a “layoff with benefits” to help mitigate job cuts, the International Association of Machinists and Aerospace Workers said on July 28.

Emerson Electric Co., a maker of industrial equipment, will cut an additional 5,000 to 6,000 positions in the next few quarters, after it posted its third straight drop in quarterly earnings, the longest stretch since 2002. The St. Louis-based company has already eliminated 20,000 jobs.

“Emerson is still seeing very difficult and challenging times around the world,” Chief Executive Officer David Farr said on a conference call on Aug. 4.

Administration officials including Lawrence Summers, director of the White House National Economic Council, predict most new jobs under President Barack Obama’s stimulus program will come only in 2010. Less than 10 percent of the $787 billion plan goes to job creation this year, and the government still expects to save or create at least 3 million jobs, Summers said in an NBC television interview on Aug. 2.

The unemployment rate may not peak until the second half of 2010, Treasury Secretary Timothy Geithner said on ABC last week, even as the economy shows signs of improvement. Another extension in unemployment benefits “is something that the administration and Congress are going to look very carefully at as we get closer to the end of this year,” Geithner said.

Bloomberg Survey

================================================================
Nonfarm Unemploy Manu Hourly
Payrolls Rate Payrolls Earnings
,000’s % ,000’s MOM%
================================================================

Date of Release 08/07 08/07 08/07 08/07
Observation Period July July July July
----------------------------------------------------------------
Median -325 9.6% -100 0.1%
Average -324 9.6% -104 0.1%
High Forecast -150 9.8% -80 0.3%
Low Forecast -460 9.2% -160 0.0%
Number of Participants 82 80 20 60
Previous -467 9.5% -136 0.0%
----------------------------------------------------------------
4CAST Ltd. -245 9.7% --- 0.1%
Action Economics -320 9.7% -100 0.1%
AIG Investments -375 9.6% --- 0.0%
Aletti Gestielle SGR -370 9.6% -110 ---
Ameriprise Financial Inc -340 9.6% -100 0.1%
Argus Research Corp. -275 9.7% -160 0.3%
Banesto -330 --- --- ---
Bank of Tokyo- Mitsubishi -362 9.2% --- 0.1%
Bantleon Bank AG -310 9.6% --- ---
Barclays Capital -275 9.6% --- 0.0%
BBVA -395 9.7% -133 0.2%
BMO Capital Markets -300 9.7% --- 0.1%
BNP Paribas -350 9.8% --- 0.1%
Briefing.com -370 9.7% --- 0.1%
C I T I C Securities -350 9.6% --- ---
Calyon -340 9.6% --- 0.1%
Capital Economics -380 9.6% --- 0.0%
CIBC World Markets -300 9.6% --- 0.1%
Citi -300 9.7% --- 0.1%
ClearView Economics -300 9.8% -85 0.1%
Commerzbank AG -300 9.6% --- 0.1%
Credit Suisse -275 9.6% --- 0.1%
Daiwa Securities America -375 9.7% --- ---
Danske Bank -313 9.5% --- ---
DekaBank -360 9.6% --- 0.1%
Desjardins Group -350 9.7% --- 0.1%
Deutsche Bank Securities -150 9.6% --- 0.0%
Deutsche Postbank AG -350 9.8% --- ---
DZ Bank -300 9.6% --- ---
First Trust Advisors -250 9.6% -100 0.1%
FTN Financial -300 9.6% --- 0.0%
Goldman, Sachs & Co. -250 9.7% --- 0.2%
Helaba -350 9.6% --- 0.1%
Herrmann Forecasting -321 9.6% -96 0.1%
High Frequency Economics -350 9.7% --- 0.1%
HSBC Markets -375 9.6% --- 0.1%
IDEAglobal -310 9.6% -90 0.1%
IHS Global Insight -330 9.7% --- 0.1%
Informa Global Markets -460 9.7% -85 0.1%
ING Financial Markets -290 9.6% -85 0.1%
Insight Economics -350 9.7% --- 0.0%
Intesa-SanPaulo -350 9.6% --- 0.0%
J.P. Morgan Chase -275 9.7% --- 0.1%
Janney Montgomery Scott L -355 9.6% --- ---
Johnson Illington Advisor -340 9.7% -130 0.2%
JPMorgan’s Private Wealth -375 9.6% --- 0.0%
Landesbank Berlin -320 9.8% --- 0.0%
Landesbank BW -380 9.6% --- ---
Maria Fiorini Ramirez Inc -375 9.6% --- 0.1%
Merrill Lynch/BAS -325 9.7% --- 0.1%
MFC Global Investment Man -330 9.6% -80 0.1%
Mizuho Securities -375 9.7% --- ---
Moody’s Economy.com -305 9.6% -90 0.0%
Morgan Keegan & Co. -296 --- --- ---
Morgan Stanley & Co. -250 9.7% --- 0.1%
National Bank Financial -200 9.5% --- ---
Natixis -310 9.8% --- 0.1%
Newedge -390 9.6% -125 ---
Nomura Securities Intl. -250 9.5% -90 0.1%
Nord/LB -370 9.6% -110 0.1%
PNC Bank -325 9.7% -90 0.0%
Raymond James -280 9.6% --- 0.1%
RBC Capital Markets -315 9.6% --- ---
RBS Securities Inc. -325 9.7% --- ---
Ried, Thunberg & Co. -350 9.6% --- ---
Schneider Foreign Exchang -310 9.6% --- ---
Scotia Capital -400 9.7% --- 0.1%
Societe Generale -285 9.7% --- 0.1%
Standard Chartered -320 9.7% --- 0.0%
Stone & McCarthy Research -375 9.5% -110 0.2%
TD Securities -375 9.7% --- ---
Thomson Reuters/IFR -320 9.8% --- 0.1%
Tullett Prebon -390 9.7% --- 0.1%
UBS Securities LLC -250 9.6% --- 0.1%
UniCredit Research -300 9.7% --- ---
Union Investment -377 9.7% --- 0.1%
University of Maryland -330 9.7% -110 0.1%
Wells Fargo & Co. -245 9.5% --- ---
WestLB AG -350 9.6% --- 0.0%
Westpac Banking Co. -270 9.7% --- ---
Woodley Park Research -247 9.4% --- 0.1%
Wrightson Associates -350 9.6% --- 0.1%
================================================================

What Does Non-Farm Payroll Mean?

What Does Non-Farm Payroll Mean?

A statistic researched, recorded and reported by the U.S. Bureau of Labor Statistics intended to represent the total number of paid U.S. workers of any business, excluding the following employees:

- general government employees
- private household employees
- employees of nonprofit organizations that provide assistance to individuals
- farm employees

This monthly report also includes estimates on the average work week and the average weekly earnings of all non-farm employees.

Investopedia explains Non-Farm Payroll

The total non-farm payroll accounts for approximately 80% of the workers who produce the entire gross domestic product of the United States. The non-farm payroll statistic is reported monthly, on the first Friday of the month, and is used to assist government policy makers and economists determine the current state of the economy and predict future levels of economic activity. "

GBP anjlok seiring statment MPC yang akan melanjutkan pembelian asset, dan resesi lebih buruk dari perkiraan

BOE Extends Bond Purchases, Saying Recession Worse Than Thought

Aug. 6 (from Bloomberg) -- The Bank of England expanded its bond purchase program beyond its original limit in an effort to spur lending and fight a recession that’s deeper than previously anticipated.

Bond yields plunged after the Monetary Policy Committee, led by Governor Mervyn King, kept the key interest rate at 0.5 percent and increased its purchase program by 50 billion pounds ($84 billion) to 175 billion pounds. The European Central Bank left its rate at 1 percent and President Jean-Claude Trichet said officials are “satisfied” on the ECB’s own purchase plan.

The Bank of England’s move suggests policy makers, who based the decision on quarterly forecasts prepared this month, assessed that their stimulus plan and record low interest rates weren’t enough to quell the threat of deflation. While services grew at the fastest pace in 1 1/2 years in July, unemployment is rising and banks have kept restricting access to credit.

“These are exceptional amounts of money being pumped into the economy,” said Nick Kounis, an economist at Fortis Bank Nederland Holding NV and a former U.K. Treasury official. “Their forecasts are probably worse then we thought, at least for inflation.”

Bond yields dropped and the pound fell after the Bank of England’s statement. The yield on the benchmark 10-year gilt fell 11 basis points to 3.71 percent and the pound declined as much as 1 percent and traded at $1.6816 as of 3:54 p.m. today in London. Eight of 12 primary dealers surveyed by Bloomberg News forecast the program would end after a pause at today’s meeting.

Economist Survey

Twenty-three of 44 economists in a Bloomberg News survey predicted an expansion of the plan, and the rest forecast no further purchases. All 60 economists in a Bloomberg News survey predicted the interest rate would stay at a record low today. The Federal Reserve has left its rate at a range of zero to 0.25 percent since December.

The European Central Bank’s rate decision matched the forecasts of all 52 economists in a Bloomberg survey. Trichet indicated to reporters in Frankfurt that the euro region’s economy may recover sooner than previously anticipated and signaled the bank is unlikely to provide further stimulus.

The Bank of England’s tone on the economy was less optimistic. It said in a statement that the recession “appears to have been deeper than previously thought.”

“While some recovery in output growth is in prospect, the margin of spare capacity in the economy is likely to continue to grow for some while yet, bearing down on inflation in the medium term,” the bank said.

Brown’s Concern

Chancellor of the Exchequer Alistair Darling authorized the Bank of England’s expanded purchases, reflecting Prime Minister Gordon Brown’s concern that the economy remains fragile. Darling originally limited the program to 150 billion pounds.

Brown said on July 22 that the bank’s so-called quantitative easing policy and interest-rate cuts have “made a difference.” He faces elections by June 2010, and his Labour Party trailed the Conservative opposition by 14 percentage points in a YouGov Plc opinion poll that ended July 30.

“I agree that an increase in the ceiling would provide the MPC with scope to vary the stance of monetary policy to meet the inflation target,” Darling wrote in a letter to the central bank.

Further clues on the central bank’s next move and its assessment of the economy may follow on Aug. 12, when King presents the new forecasts prepared by his staff.

Goodhart’s View

Former policy maker Charles Goodhart told Bloomberg Television yesterday that he favored an expansion of the bank’s purchase program.

“The economy is still fragile, monetary figures are still very low, bank lending hasn’t increased yet and quantitative easing has the great advantage that it can be reversed very quickly,” Goodhart said yesterday. “We don’t lose anything if we continue, and we might gain.”

A measure of money supply watched by the bank to assess quantitative easing, known as M4 excluding intermediate financial companies, grew at an annualized rate of 3.7 percent in the second quarter, compared with 6.4 percent for the same period in 2008. Mortgage approvals reached a 14-month high in June of 47,584. That’s a third lower than at the start of 2008.

Unemployment, which reached the highest since 1995 in the quarter through May, may rise further as the economic slump prompts companies to cut staff. GKN Plc, the U.K. maker of car parts for Bayerische Motoren Werke AG, and aircraft components for Airbus SAS, said Aug. 4 that it will cut 1,100 more jobs in the next 12 months.

‘Not Enough’

“It’s not enough, I think they need to do more,” John Greenwood, chief international economist at Invesco Asset Management, said on Bloomberg Television. “In the shadow monetary policy committee I’ve been voting for a further 150 billion and to stretch that out to year end.”

An index of services rose this month to the highest since February 2008, and a gauge of manufacturing showed the first expansion this year, Markit Group Ltd. said this week. A report by Lloyds’s Halifax division showed house prices jumped almost twice as much as economists forecast last month.

Lloyds Banking Group Plc, which is 43 percent owned by the government, said yesterday it lost 3.1 billion pounds in the first half and won’t renew about 200 billion pounds of higher- risk loans as they come due over the next five years.

Barclays Plc, the U.K.’s second-biggest lender, said on Aug. 3 that first-half earnings rose 10 percent as profit from investment banking almost doubled. Aviva Plc, Britain’s second- largest insurer by market value, said today that it swung to a first-half profit as margins on the sale of life insurance policies increased.

If policy makers choose in future to expand the purchase program further, the central bank would expect Darling to allow them to do so by “a reasonable amount,” Deputy Governor Charles Bean told the BBC in an interview last month.

ECB and Bank of England to hold rates steady

ECB, Bank of England to hold rates steady
Resume by Langkah21

FRANKFURT — Central banks for Europe and Britain are almost certain to keep their benchmark interest rates at record lows on Thursday amid early signs of economic recovery, while attention will focus on whether the Bank of England will hold back from further expanding the money supply.

Both the European Central Bank and the Bank of England are expected to keep rates at 1 percent and 0.5 percent respectively when they announce their monthly decision.

Recent economic data in both the euro zone — a block of some 320 million people comprising nearly 17 percent of the world's output — and Britain have suggested early signs of an economic turnaround.

That will leave all eyes on the Bank of England's so-called quantitative easing program to stimulate growth by boosting the domestic money supply.

BoE policymakers surprised analysts last month when they opted to hold the program at 125 billion pounds, despite access to a further 25 billion pounds under the banks' current mandate from the Treasury.

With recent data on Britain's key services and manufacturing industries showing further improvements on Wednesday, analysts think it is likely the British bank will see enough upbeat signs to again refrain from pumping more money into the economy, at least for now.

Increasing the supply of money can stimulate growth, but risks worsening inflation down the road. It comes on top of steep cuts in interest rates — the usual tool for boosting the economy.

The ECB, meanwhile, mindful of some signs of economic recovery, will consider European Union statistics that last week showed unemployment in the euro zone countries rose to a level not seen in a decade and consumer prices slipping more than expected. Eurostat said it estimated consumer prices fell 0.6 percent in July compared with the year-ago period.

Meanwhile, the office said unemployment rose to 9.4 percent in June — the highest level since June 1999 — after 9.3 percent in May.

Still, analysts anticipate the bank will keep rates on hold and not announce any new measures on "enhanced credit support," the ECB's version of quantitative easing.

"We suspect the ECB will enjoy the luxury of a relatively non-contentious get-together," Calyon Credit Agricole analysts said in a note to clients.

"Inflation may have been lower than expected, but there has been nothing to force any major reassessment," Calyon said.

In May, the ECB announced it would buy euro60 billion ($86.4 billion) in covered bonds, a relatively safe way to provide markets with more cash. The program is ongoing and the ECB said earlier this week it's spent just euro4.9 billion of the allotted money so far. The bank could announce more details about the ongoing program Thursday.

Though many observers have begun to speculate about exit strategies away from the "extraordinary measures" the ECB has undertaken in concert with the BoE, U.S. Federal Reserve and others, UniCredit's chief economist Aurelio Maccario said interbank lending is still far from past levels and the "exit is not nigh."

from:
AP Business Writer Jane Wardell reported from London.

Fed’s Yellen Says Rates May Stay Near Zero for Years

july 28 (from Bloomberg) --
Resume by Langkah21


Federal Reserve Bank of San Francisco President Janet Yellen said the U.S. economy is showing the “first solid signs” of emerging from the recession and should resume growth later this year.

“That recovery is likely to be painfully slow” as consumers spend less and save more, Yellen also said in a speech today in Coeur d’Alene, Idaho. “A gradual recovery means that things won’t feel very good for some time to come.”

Yellen’s remarks echo the view of Fed Chairman Ben S. Bernanke, who told Congress last week the economy is showing “tentative signs of stabilization.” Those indications include a rising stock market, slowing declines in housing prices and a waning pace of job losses, the regional bank president said.

“The interaction between the economy and the credit crunch, often described as an adverse feedback loop, led to what could become the most severe recession since the Great Depression,” the 62-year-old bank chief, who votes on monetary policy this year, said in the speech to a convention of the Oregon Bankers Association and Idaho Bankers Association.

“We glimpse the first solid signs since the recession started more than a year and a half ago that economic growth may be poised to resume,” Yellen said. “Indeed, I expect that to happen sometime this year,” she said, while adding that risks to the outlook remain, with the commercial property slump the biggest threat.

Fed Forecasts

Fed officials anticipate the U.S. economy will contract less this year than they had projected in April, even as unemployment climbs to as high as 10 percent, according to their latest forecasts released on July 15.

Consumer prices are now forecast to rise by 1 percent to 1.4 percent this year, compared with April projections of 0.6 percent to 0.9 percent. Excluding food and energy, prices are expected to increase 1.3 percent to 1.6 percent, up from a range of 1 percent to 1.5 percent three months earlier. The figures reflect the central tendency of projections, which exclude the three highest and three lowest forecasts.

Core inflation will probably remain below 2 percent “for several years,” Yellen said.

“The Fed is keenly aware” of the need to tighten policy in time to avert higher inflation, Yellen said. “When the economy does come back, I can assure you that we will act decisively and appropriately to tighten the stance of policy and maintain price stability.”

‘Not the Time’

In response to audience questions, Yellen said the Fed would need to stay “ahead of the curve” and tighten policy before the unemployment rate returns to a more normal level of about 5 percent. “That said, this is not the time” to raise rates, she said.

Most Fed officials last month considered the economy “still quite weak and vulnerable to further adverse shocks,” even as they rejected an expansion in asset purchases, according to minutes of their June 23-24 meeting in Washington.

Yellen today said, “there remains some chance that economic conditions could turn out worse than what I’ve sketched.”

“High on my worry list is the possibility of another shock to the still-fragile financial system,” particularly in commercial real estate, she said. “Our biggest concern now is with maturing loans on depreciated commercial properties.”

Job Losses

Employers reduced payrolls by 467,000 last month and the unemployment rate rose to the highest in almost 26 years. The world’s largest economy has lost about 6.5 million jobs since December 2007.

Payrolls have shrunk at a “dreadful pace” and unemployment is poised to go higher, Yellen said.

The regional Fed president said she expects demand for U.S. debt to stay “strong” even as the government sells a record $115 billion of Treasuries this week.

“I believe the market for our debt will remain strong because savings throughout the global economy is very strong and competition from private issuance is very weak,” Yellen told reporters after the speech.

The government sold a record $42 billion of two-year notes today, the biggest offering of the notes since the Treasury began monthly auctions of them in the mid-1970s. Indirect bidders, a class of investors that includes foreign central banks, bought 33 percent of the notes.

The only thing that would impair demand is an erosion in confidence in U.S. policy, Yellen said, adding she sees “no reason” that will happen.

Yellen praised Bernanke’s performance as Fed chairman, adding that he has tried to strengthen the role of the policymaking committee. Bernanke has made it clear that sound policy relies on the actions of the entire central bank rather than on just a powerful chairman, she said.

“My own view is he has done an excellent job of managing through the most difficult time in U.S. economic history since the Great Depression,” Yellen said of Bernanke. Still, “we would not be lost” if he were not reappointed at the conclusion of his term in January, she said.

from;
Vivien Lou Chen in San Francisco at vchen1@bloomberg.netSteve Matthews in Atlanta at smatthews@bloomberg.net