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Exit Strategy

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Weak Job Market and Low Inflation Stall Fed's "Exit Strategy"

By , Associate Editor, Money Morning -

Any speculation that U.S. Federal Reserve Chairman Ben Bernanke had his finger on the "exit strategy" trigger has been silenced.

Bernanke yesterday (Wednesday) faced the House Financial Services Committee to instill public confidence in the Fed's ability to exercise a smooth exit strategy and quell continued fears of a tightening monetary policy.

The Federal Open Market Committee (FOMC) "continues to anticipate that economic conditions -- including low rates of resource utilization, subdued inflation trends, and stable inflation expectations -- are likely to warrant exceptionally low levels of the Federal Funds rate for an extended period," he said.

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Seven Signs of the Fed's Eventual "Exit Strategy"

By , Money Morning -

Looking for an exact date when U.S. Federal Reserve Chairman Ben S. Bernanke and his fellow central bank policymakers will raise interest rates?

Experts refer to this eventuality as Bernanke's "exit strategy" - a financial euphemism for the interest-rate increases that are certain to come ... at some point.

That's just it - those experts can't tell you when that exit strategy will begin. I can't tell you that, either (Sorry, loaned my crystal ball to Miss Cleo for her new infomercial).

But what I can give you that the pundits can't is a "Road Map to Higher Interest Rates," which spells out the specific events that should precede the most-heavily anticipated U.S. central bank interest-rate increase in history. Follow it and you should be perfectly positioned to profit when the time comes.

(Remember, a few months ago, I introduced Senior Secured Floating Interest Rate Bonds, or SSFRs, an investment that you'll want to own when interest rates rise.)

So, without further ado...

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Fed Gambles on Low Inflation and a Stable Housing Market

By , Managing Editor, Money Morning -

The so-called "exit strategy" has yet to enter the picture.

U.S. Federal Reserve policymakers yesterday (Wednesday) announced that the benchmark Federal Funds rate would remain in its record-low range of 0.00% to 0.25% for an "extended period." And policymakers also said that the nation's central bank would continue with its plan to wind down its purchases of agency debt and mortgage-backed securities.

The term "exit strategy" is a financial euphemism for boosting interest rates. By keeping short-term interest rates at what many experts say are artificially low levels, the Fed is betting that inflation will remain subdued in the short and medium-term and that the beleaguered U.S. housing market will be able to stage its recovery without crutches.

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Can Bernanke Tune Out Political Pressure as the FOMC Again Ponders Policy Changes?

By , Managing Editor, Money Morning -

When U.S. Federal Reserve Chairman Ben S. Bernanke emerges from the central bank's monthly policymaking meeting at around 2:15 p.m. today (Wednesday), it's a near certainty that he'll reaffirm his pledge to keep interest rates "exceptionally low" for an "extended period" of time.

Bernanke has kept the benchmark Federal Funds rate at a record low range of 0.00%-0.25% since December 2008, and that's not likely to change as a result of today's meeting of the central bank's Federal Open Market Committee (FOMC).

At some point, however, Bernanke will have to tighten credit and raise interest rates in order to soak up all the excess liquidity and curb inflation in the U.S. economy. But the question remains: When that time comes, will Bernanke have the fortitude to do so?

There's no simple answer. And for good reason: With the country mired in its worst financial crisis in most Americans' lifetimes, the central bank's decisions now are as political in focus as they are economic.

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Hedge Funds Take Direct Stakes in Commodities … Should We Be Wary?

By , Global Investing Specialist, Money Morning -

ScotiaMocatta, the Canadian commodities trader and subsidiary of the Bank of Nova Scotia (NYSE: BNS), has asked regulators to approve plans for a fund that would take physical positions in copper. Credit Suisse Group AG (NYSE ADR: CS) is working with Glencore International AG, the world's largest trading house, on an exchange-traded fund (ETF) that […]

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Fed: Recession "Very Likely Over," but Threats Remain

By , Managing Editor, Money Morning -

U.S. Federal Reserve Chairman Ben S. Bernanke said yesterday (Tuesday) that the worst recession since the Great Depression is "very likely over." However, Bernanke also said that unemployment would remain high and keep the recovery from accelerating. "Even though, from a technical perspective, the recession is very likely over at this point," Bernanke said, "it's […]

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Why Ben Bernanke's Incomplete 'Exit Strategy' Could Lead to a Decade-Long Downturn

By , Capital Wave Strategist, Money Morning • @WallStreet_II -

At its most basic level, the U.S. Federal Reserve's so-called "exit strategy" is designed to let government bailout and liquidity programs unwind on their own, as markets return to a state of "normalcy." But what investors don't realize is that without an exit strategy that includes plans for unwinding insolvent mortgage giants Fannie Mae (NYSE: […]

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Four Ways to Profit if Bernanke's 'Exit Strategy' Backfires

By , Managing Editor, Money Morning -

By Jason Simpkins Managing Editor Money Morning After more than a year of lax monetary policy and direct capital infusions, U.S. Federal Reserve Chairman Ben S. Bernanke has finally outlined an "exit strategy" that he says will lead to the "smooth and timely" withdrawal of monetary stimulus and keep inflation at bay. However, analysts say […]

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