Federal Reserve Modifies Guidance,Not Policy

Although the Federal Reserve's Open Market Committee held steady its low interest rate monetary policy on Wednesday,it has altered its guidance because it doesn't want to be bogged down in the past.The FOMC reaffirmed that the 0-0.25 interest rate range remains appropriate,Fed Chair Janet Yellen said in a news conference after the FOMC meeting drew to a close-the last such meeting of the year.The FOMC judges it can be patient in beginning to normalise monetary policy,Ms.Yellen continued;adding,however,that some modification to our guidance is appropriate at this time.The majority of the FOMC believes interest rates will be raised in 2015.*
Progress continues to maximum employment.Job growth has been strong recently.The Committee continues to see sufficient underlying strength in the economy to continue to support employment growth.Inflation continues to run beneath the Committee's 2% objective.The Committee expects inflation to gradually move back to its objective.For the US,the oil price drop is a net positive.*
History shows central bank independence promotes better economic performance.We are accountable to Congress in explaining what we do,but I would be very concerned about any change to the policy of no audits of monetary policy.*
We certainly did review global economic developments,including developments in the Russian economy.The drop in oil prices is posing a series of difficult conditions for the Russian economy.I expect the spillover to the US would be small,Ms.Yellen noted,citing the small percentage of Russian holdings in US portfolios and the small amount of trade between the two countries.*
The S&P 500 rose 40.15,or 2,4%,in response to the Fed's decision.

Russia Needs To Modernize

Years of strong energy prices covered up Russia's serious problems,President Dmitry Medvedev noted recently.The time is running out for Russia to turn itself into a modern nation.They do not produce competitive goods.Mr.Medvedev called on Russia to re-focus away from energy and heavy industry towards information technology,telecom and space.Once the space shuttle program ends next year,the U.S. will be relying on Russia's Soyuz spacecraft to ferry American astronauts to the International Space Station.
It has been said that Mr.Medvedev has a vision for Russia,but only Prime Minister Vladimir Putin can implement it.Whatever the political reality,Russia faces military challenges in its North Caucusus region.In Ingushetia,Islamic militants have killed more than 200 this year,many of them with suicide bombs.Ongoing tensions in the region divert attention and money from the need for economic transition.

Russian Growth Slows

Russia's Economy Ministry has cut the country's growth forecast for 2008.The economy is now expected to expand at 6.8-7%,instead of the previous estimate of 7.3%.The 7.3% estimate had itself been lowered from 7.8% in October.The Russian economy,rooted in energy production,has fallen out of a 10 year boom as ailing credit markets hindered banks,brokerages,builders,metal and chemical firms.Meanwhile,the country is mourning the death of His Holiness Alexei II,Patriarch of Moscow and All Russia,who,as primate of the Russian Orthodox Church,led about two-thirds of the Russian people in their spiritual lives.Patriarch Alexei,79,was known for largely restoring the Church to its pre-revolutionary position in Russian life,repairing many old churches and building new ones.He had suffered from heart trouble.