Business Blog Posts

Bernanke will kick off a program of four-times-a-year news conferences on April 27 following a regularly scheduled two-day Fed meeting on monetary policy, the central bank said on Thursday. It will be the first regularly scheduled briefing by a Fed chairman in the history of the nearly 98-year-old central bank.

Future briefings will coincide with Fed meetings at which officials provide their quarterly economic forecasts, which fall in June and November this year.

"The introduction of regular press briefings is intended to further enhance the clarity and timeliness of the Federal Reserve's monetary policy communication," the central bank said.

Bernanke has taken a number of steps to boost transparency at the Fed during his tenure as chairman, and the latest announcement brings it into line with some other central banks. The head of the European Central Bank holds a news conference after each ECB policy meeting, while the governor of the Bank of England briefs media quarterly.

Congressional and public outcry for greater Fed disclosure grew louder in the wake of the recent financial crisis, during which the Fed undertook extensive unorthodox emergency measures.

The Fed has a reputation for conducting its operations behind closed doors and shielding details of its decision-making from view.

Despite a gradual shift to greater openness in recent years, the Fed has fought to keep some of the details of its operations secret. This week, it lost a court battle to withhold the names of banks that had taken emergency loans from its last-resort lending facility during the financial crisis.

To make its operations more open, the central bank has in recent years begun issuing its forecasts quarterly, rather than twice a year, and moved up the publication of minutes of policy meetings to three weeks from about six weeks.

It did not begin announcing its interest rate moves until 1994.

Since the financial crisis, Bernanke has stepped up efforts to explain the central bank's actions to the public, giving two extensive television interviews and delivering speeches at which reporters have been able to ask questions.

Janet Yellen, the Fed's vice chairman, has led a subcommittee since November to examine the central bank's communications practices. The Fed said on Thursday it would continue to review its policies "in the interest of ensuring accountability and increasing public understanding."

(Reporting by Mark Felsenthal; Editing by Neil Stempleman and Dan Grebler)

But other data Thursday showed the improvement in the labor market was becoming sustained, with new claims for jobless benefits falling last week and the four-week moving average dropping to it lowest level in more than 2-1/2 years.

The Commerce Department said durable goods orders fell 0.9 percent after a 3.6 percent increase in January. Economists polled by Reuters had expected a 1.1 percent increase. Excluding transportation, orders fell 0.6 percent after dropping 3.0 percent in January.

"Durables were extremely disappointing ... it is not a very good sign for what is happening in the first quarter," said Rudy Narvas, a senior economist at Societe Generale in New York.

The durable goods report conflicted with other data on manufacturing, which have underscored the strength in factory activity.

A second report from the Labor Department showed initial claims for state unemployment benefits slipped 5,000 to a seasonally adjusted 382,000, a touch below economists' expectations for a fall to 383,000.

The four-week moving average of unemployment claims -- a better measure of underlying trends - dropped 1,500 to 385,250, the lowest since mid-July 2008 and holding below the 400,000 level for a fourth straight week.

A reading below 400,000 is generally associated with steady job growth, which until recently had eluded the economic recovery. Employers created 192,000 jobs in February, the most in nine months, after adding a paltry 63,000 new workers in January.

The Federal Reserve has acknowledged the improvement in labor market conditions and is generally expected to conclude its $600 billion government bond buying program at the end of June.

Analysts believe the economy is now on course to create at least 150,000 jobs a month over a sustained period, which should prevent the unemployment rate from rising much, even as Americans who had given up looking for work re-enter the job market.

But some caution the devastating earthquake and tsunami in Japan, and rising gasoline prices could dent business confidence and cause companies to delay hiring.

There are signs that businesses are starting to tread cautiously.

The Commerce Department report showed non-defense capital goods order excluding aircraft, a closely watched proxy for business spending, fell 1.3 percent in February after a 6.0 percent fall the prior month. Economists had predicted a 4.5 percent improvement in this category.

"We all know that housing and consumption will be weak, lagging sectors. So if the business sector's expansion momentum stalls, this is bad news, creating a risk of disappointing employment gains in coming months," said Dan Dorrow, head of research at Faros Trading in Stamford, Connecticut.

The number of people still receiving benefits under regular state programs after an initial week of jobless aid fell 2,000 to 3.72 million in the week ended March 12, the lowest level since September 2008.

The continuing claims data covered the week for the household survey from which the unemployment rate is derived. The jobless rate dipped to 8.9 percent in February from 9.0 percent in January and has dropped 0.9 percentage point in the past three months.

Economists had expected so-called continuing claims to fall to 3.70 million from a previously reported 3.71 million.

(Reporting by Lucia Mutikani and David Lawder; Additional reporting by Chris Reese in New York, Editing by Andrea Ricci)

Labor Department releases at 1230 GMT (8:30 a.m. ET)first-time claims for jobless benefits for the week ended March 19. Economists in a Reuters survey forecast a total of 383,000 new filings, compared with 385,000 in the prior week.

Oracle Corp (ORCL.O) is poised to provide fresh evidence of the upward curve of technology spending on Thursday, and to detail its battle plan against emerging competitor Hewlett-Packard Co (HPQ.N) as the two tech giants vie to lead the datacenter revolution.

Other companies to announce results include Best Buy (BBY.N), ConAgra Foods (CAG.N) and Darden Restaurants (DRI.N).

Commerce Department will release at 1230 GMT February durable goods orders data. Economists expect a rise in orders of 1.1 percent, versus a 3.2 percent increase in January.

Portuguese Prime Minister Jose Socrates resigned on Wednesday and warned of grave consequences for the country after parliament rejected his government's latest austerity measures aimed at avoiding a bailout.

The yield on 10- and five-year Portuguese government bonds rose to a new euro-era high on Thursday after Socrates' move, increasing expectations Lisbon will follow Greece and Ireland to seek international aid. It also threw into disarray a summit of European Union leaders later this week at which they had been expected to take tough decisions to address the region's debt crisis.

Ratings agency Moody's downgraded its debt ratings of 30 Spanish banks by one or more notches, and said the outlook remained weak with no major improvement seen in the foreseeable future. The ratings cut followed the downgrade of Spain sovereign debt rating on March 10 by the agency to Aa2.

Western warplanes hit Libya for a fifth night on Thursday, but so far have failed to stop Muammar Gaddafi's tanks shelling rebel-held towns or dislodge his armor from a strategic junction in the east.

Stores in Tokyo were running out of bottled water after radiation from a damaged nuclear complex briefly made tap water unsafe for babies, while more nations curbed imports of Japanese food.

Shares in Red Hat Inc (RHT.N) and Micron Technology Inc (MU.O) rose 8 percent and 3.7 percent respectively after the bell on Wednesday after the companies announced results.

On Wednesday, the Dow Jones industrial average .DJI gained 67.39 points, or 0.56 percent, to 12,086.02. The Standard & Poor's 500 Index .SPX rose 3.77 points, or 0.29 percent, to 1,297.54. The Nasdaq Composite Index .IXIC climbed 14.43 points, or 0.54 percent, to 2,698.30.

European shares were little changed on Thursday, with gains in heavyweight mining firms outperforming weak banking stocks which were pressured by persistent fears over the euro zone debt crisis.

(Reporting by Atul Prakash; editing by Sophie Walker)

"I would say we did not discuss this option," Trichet told a news conference after a meeting of the ECB's Governing Council. Four days later, the ECB announced that it would start buying bonds.

Trichet's U-turn was part of an emergency package with euro zone leaders to stave off a crisis of confidence in the single currency. By reaching for its "nuclear option", the ECB had also helped rewrite the manual of modern central banking.

That's happened a lot over the past three years. Since the early days of the financial crisis in 2008, the European Central Bank, the U.S. Federal Reserve and the Bank of England have all been forced to adopt policies that just a few years ago they would have dismissed as preposterous. And the Bank of Japan responded to the Sendai earthquake and tsunami by doubling its own asset-purchase programme, to keep the banking system of the world's third-largest economy on an even keel.

For a generation, the accepted orthodoxy has been to focus on taming inflation. Financial stability has taken something of a back seat. Now, whether mandated to do so or not, western central banks have bought up sovereign debt to sustain the financial system, printed money by the truckload to stimulate their economies, sacrificed some of their independence to coordinate monetary policy more closely with fiscal decisions, and contemplated new ways of preventing asset bubbles. Some -- such as Bank of England Governor Mervyn King -- have joined wider political protests at commercial banks that are still behaving as if they are "too big to fail", and as if being bailed out is just a hazard of business.

In the measured world of central banking, it amounts to nothing short of a revolution. Otmar Issing, one of the euro's founding fathers and a career-long monetarist hawk, told Reuters that in buying government bonds the ECB had "crossed the Rubicon". The question now for the ECB -- and for its counterparts in Britain, the United States and elsewhere -- is what they'll find on the other side.

EXTRAORDINARY CIRCUMSTANCES

Don Kohn, a former vice-chairman of the Federal Reserve, realized central banking was changing forever at a routine meeting of his peers in Basel, Switzerland, in March 2008. The shockwaves from the U.S. subprime mortgage meltdown had begun rocking banks around the world and Kohn, a 38-year veteran of the U.S. central bank, listened as one speaker after another described the fast-deteriorating economic conditions.

"It was terrible," Kohn said. "One of the people at the meeting used the phrase, 'It's time to think about the unthinkable'."

Kohn left the meeting early to return to Washington, but the line stuck in his head. He would use it a few days later to justify his support for a Federal Reserve decision to spend $29 billion to help J.P. Morgan buy investment bank Bear Stearns, which was teetering on the edge of bankruptcy.

That financial meltdown caused a credit crunch that triggered a severe recession and, in countries such as Greece, a sovereign debt crisis. After slashing interest rates practically to zero, central banks desperate to prevent a new global depression had no choice but to expand the volume of credit, rather than its price, by reaching for the money-printing solution known as "Quantitative Easing" (QE). In the eyes of critics, Federal Reserve Chairman Ben Bernanke was living up to his nickname of "Helicopter Ben" -- a reference to a speech that he gave in 2002 in which he took a leaf out of the book of the renowned monetarist economist Milton Friedman and argued that the government ultimately had the capacity to quash deflation simply by printing money and dropping it from helicopters.

Until that point, the Fed was a lender of last resort for deposit-taking banks. By invoking obscure legislation from the Great Depression, it also became a backstop for practically any institution whose collapse could threaten the financial system. Kohn and others at the Bear Stearns meeting had just done the unthinkable.

"When the secretary of the (Fed) Board was reading off the proposals ... my heart was racing," Randall Kroszner, a Fed governor at the time, says of the decision.

An academic economist from the conservative, free market-oriented University of Chicago, Kroszner was instinctively against intervention. At the same time, he knew that a decision by the Fed to stay above the fray would trigger financial panic. Before the meeting Kroszner had chatted with Bernanke, another scholar of economic history, about a historic parallel in which financier J.P. Morgan -- the person, not the company -- opted against stepping in to save the Knickerbocker Trust, precipitating a financial panic in the first decade of the 20th century.

"I couldn't believe that we were faced with these questions, and I couldn't believe that I could support them," Kroszner told Reuters in February. "In these extraordinary circumstances, it was very risky to just say no."

For months, EU leaders have talked about using the summit in Brussels on Thursday and Friday to reach final agreement on a "comprehensive package" of steps that would stop the crisis from spreading further through the 17-country euro zone.

But Portuguese Prime Minister Jose Socrates submitted his resignation on Wednesday night after parliament rejected his government's latest austerity measures, which were designed to help Portugal avoid having to seek an international bailout.

Socrates is now expected to attend the summit as the leader of a caretaker government which may last no longer than Friday. Major decisions affecting the euro zone have to be agreed by all members of the zone; Portugal may only be able to give its assent after it forms a new government, which could take two months.

Finland has dissolved its parliament ahead of elections on April 17 and cannot take any formal decisions until it has a new government, which is only likely by May at the earliest. The new government may include the euroskeptic True Finns party, which opposes some of the EU's proposed crisis steps.

And an opinion poll published on Wednesday showed support for German Chancellor Angela Merkel's conservatives dropping sharply across the country before an election this Sunday in the important state of Baden-Wuerttemberg.

The approach of the election has contributed to a hardening of Germany's stance on new measures to aid indebted euro zone countries ahead of the summit.

FADING HOPES

Fading hopes for a breakthrough at the summit, combined with concern over the possibility of a bailout for Portugal, pushed the euro down moderately on Wednesday, while government bond yields for weaker euro zone states rose.

Over the last few months, EU leaders have made considerable progress in putting together the crisis package. They have decided in principle to expand the lending capacity of the European Financial Stability Facility, the euro zone's bailout fund, from 250 billion euros to its full size of 440 billion.

But they have so far been unable to agree on exactly how the EFSF's capacity will be increased. And although they have decided to create a permanent bailout fund to replace the EFSF in 2013, the 500 billion euro European Stability Mechanism, there are doubts about how to achieve this too.

A German official said on Wednesday that Germany now wanted this week's summit to alter a timetable agreed by EU finance ministers on Monday for injecting cash into the ESM.

While this is essentially a technical issue, it contributes to a sense in financial markets that EU member states are endlessly at odds over how best to handle the debt crisis, and that everything could unravel if deals are not respected.

Draft conclusions prepared for the summit, seen by Reuters on Wednesday, suggested that final decisions on how to strengthen the EFSF and establish the ESM might only be taken by the EU shortly before a deadline at the end of June.

NO MOVE ON IRELAND