As Fed Eases Loan Aid, Policy Challenges Arise

The Federal Reserve has terminated nearly all of the extraordinary lending programs it created in 2007 and 2008 to combat the credit crisis. But it now faces critical decisions in coming months about when and how to tighten monetary policy, according to two Fed officials.

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The officials” Brian P. Sack, the executive vice president who oversees the trading desk at the Federal Reserve Bank of New York, and Charles L. Evans, president of the Chicago Fed” spoke this week at an economic policy conference here sponsored by the National Association for Business Economics, Sewell Chan reports in The New York Times.

Neither challenged the position that the Fed chairman, Ben S. [Read the full article]

Economists believe that the federal budget deficit through the first five months of the budget year is running at a record-breaking pace, with the February imbalance likely to climb to the highest level this fiscal year.

Economists surveyed by Thomson Reuters expect the deficit for February will hit $222 billion, up by $28.1 billion from the imbalance in February 2009. The Treasury Department is scheduled to release the February budget figures at 2 p.m. EST Wednesday.

If economists are correct about the big shortfall in February, it will push the deficit total since the budget year began last October to $653.14 billion, an increase of 10.7 percent from the deficit total for the first five months of the 2009 budget year.

The deficit for all of 2009 hit a record $1.4 trillion and the Obama administration is forecasting that the deficit for this year will hit $1.56 trillion and will remain above $1 trillion for a third straight year in 2011. [Read the full article]

The Greek economy is set to shrink by more than expected this year, the government said on Wednesday, as it braced for nationwide strikes protesting its plans for bringing the country’s budget deficit under control.

Greece, grappling with a ballooning deficit and a 300 billion euro ($407 billion) debt pile, told the European Union that 2010 gross domestic product (GDP) would “most likely” shrink by more than the 0.3 percent currently forecast.

It also said the drop may exceed an alternative, more pessimistic, scenario published in Greece’s Stability and Growth Programme in January envisaging a 0.8 percent contraction.

Economists and ratings agencies have warned that a sharper than expected slowdown in the economy is one of the biggest threats to Greece’s commitment to cut its budget deficit to 2.8 percent of GDP by 2012 from close to 13 percent last year. [Read the full article]

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