After a customer backlash, Verizon Wireless on Friday dropped a plan to start charging $2 for every payment subscribers make over the phone or online with their credit or debit cards.
In a statement on its website Friday, the company said “customer feedback” prompted the decision to drop the “convenience fee” it wanted to introduce on Jan. 15.
Verizon wanted to steer people to electronic check payments, which are cheaper, and automatic credit card payments, which are more reliable.
A petition on Change.org against the fees had gathered more than 95,000 names by Friday afternoon, a day after Verizon, the country’s largest cellphone company, announced the fees. The petition was set up by Molly Katchpole, who earlier this year started a successful campaign to make Bank of America drop a $5-per-month fee for debit card use electronic check payday advance.
Payment processors for power companies usually charge “convenience fees” of up to $5 for every payment made by phone or online, but cellphone companies haven’t taken the step yet. The furor against Verizon hints that they may have to wait further.
Verizon Wireless serves 91 million phones and other devices on accounts that pay the company directly, and more who pay indirectly through other companies. It’s a joint venture of Verizon Communications Inc. of New York and Vodafone Group PLC of Britain.
South Korean consumer confidence fell to a three-month low in December, as concern the political outlook in the North will worsen in the wake of Kim Jong Il
A slew of bad news on European banks has fueled fears about their ability to survive the debt crisis and raised the prospect of a new global credit crunch.
Five large lenders saw their credit ratings downgraded this week, and a sixth, Commerzbank, saw its stock plunge on speculation it might need more government support. As uncertainty grows that a fellow lender might collapse, banks are cutting back on lending to each other for fear of not getting their money back.
When that credit between banks dries up, loans soon stop flowing to businesses and households, stunting economic growth. On Thursday, the rates banks charge to lend dollar to one another remained at their highest level since September.
The heart of Europe’s problem is bad government debt _ a phrase that until recently was nearly an oxymoron. Government bonds of wealthy countries were long considered the safest of safe assets.
But as the debt loads of European countries soared, investors began to wonder if their governments could pay back the loans, so they began charging more to extend those loans. That only fed a vicious circle: The more governments had to pay to borrow money, the more trouble they had paying it back. Eventually, Greece had to admit it wouldn’t repay all of its loans _ and that shattered confidence in other eurozone countries. Would Italy renege? Would Spain? France?
European leaders have been struggling to reassure investors that they will pay back their debts and to work out a way to make sure they never again grow so large. But in the meantime, the bonds are all still out there, their value has plunged, and much of them sit in Europe’s banks.
In addition, banks are struggling to raise more cash for their rainy-day funds, their stocks are plunging and they’re facing higher borrowing rates.
“European banks remain the nexus of most European problems,” analyst Huw Van Steenis wrote in a Morgan Stanley research note.
It’s the banks that “transmit” the debt crisis to businesses and consumers, he argues. Because what were traditionally their safest assets _ government bonds _ are now among some of their most suspect, banks are struggling to secure the loans they need to fund their day-to-day operations. Until the debt crisis erupted, those government bonds typically served as collateral for loans from other banks.
When banks stop lending to one another, they also stop lending to the “real economy”: homeowners, consumers, businesses. The European Central Bank’s lending survey in October, the latest available, showed that standards for lending to businesses tightened significantly, and that banks expected them to tighten even further through the end of the year.
The banks also told the ECB that they were finding it increasingly hard to get their hands on loans. The percentage of banks saying their access to markets was tightening skyrocketed in the October report. They expected that situation to improve a bit toward the end of the year but to remain difficult.
Even that grim assessment may have been overly rosy: The rates banks charge each other to borrow dollars overnight has been steadily increasing in recent weeks. On Thursday, the rate known as LIBOR was 0.1505 percent _ a high matched once last week but not surpassed since late September.
The ECB has stepped in to lend to banks when no one else will. As a measure of how bad things have gotten, the ECB supplied banks with a total average of euro615.3 billion ($801 billion) in ready money to operate their businesses over the three months to Nov. 8. That’s up euro99.1 billion ($129 billion) from what banks needed in the previous three months.
World stocks were mostly lower Wednesday after the Federal Reserve refrained from offering new initiatives to help a slowly recovering U.S. economy.
Benchmark oil hovered below $100 per barrel while the dollar fell against the euro and the yen.
European stocks were mixed in early trading. Britain’s FTSE 100 rose 0.4 percent to 5,447.88. But Germany’s DAX lost 0.9 percent to 5,719.42 and France’s CAC-40 fell 1.1 percent to 3,043.60. Wall Street appeared headed higher, with Dow Jones industrial futures up 0.3 percent to 11,938 and S&P 500 futures rising 0.5 percent to 1,225.80.
Asian shares closed lower. Japan’s Nikkei 225 index fell 0.4 percent to end at 8,519.13, its lowest close in two weeks. South Korea’s Kospi lost 0.3 percent at 1,857.75 and Hong Kong’s Hang Seng shed 0.5 percent to 18,354.43. Australia’s S&P/ASX 200 was flat at 4,190.50.
On mainland China, the benchmark Shanghai Composite Index fell 0.9 percent to 2,228.53, the lowest closing since March 2009. Benchmarks in Singapore, India and Indonesia fell while Taiwan and the Philippines rose.
The Fed on Tuesday said that the U.S. economy, while improving, is still weak. Unemployment remains high, and it remains vulnerable to the European debt crisis, which could push the continent into a recession and slow U.S. growth.
Analysts said markets were disappointed that the Fed refrained from a third round of large-scale purchases of Treasury securities, dubbed quantitative easing III or QE3.
“I think QE3 would be a welcome change to the status quo. I think the market was disappointed,” said Francis Lun, managing director of Lyncean Holdings in Hong Kong.
Sentiment also remained fragile amid threats by Standard & Poor’s to downgrade the credit ratings of 15 countries that use the euro because of the region’s debt crisis.
“We are likely to continue seeing some cautious trading as the threat of S&P coming out to issue some downgrades at some stage this week looms,” said Stan Shamu of IG Markets in Melbourne, Australia payday loan lenders.
“Some would argue that this is already priced in, but it will still likely rock the boat should it happen.”
Export shares in Japan were under pressure as the yen strengthened against a shaky euro. Sharp Corp. dropped 2.9 percent while Toshiba Corp. lost 1.2 percent. Honda Motor Corp. slid 2.2 percent.
Chinese property shares dropped after the government signaled that it would maintain price curbs on real estate.
“The government has set a clear tone for reining in runaway housing prices next year,” Wang Yulin of the Ministry of Housing and Urban-Rural Development was quoted as saying by Xinhua news agency.
Hong Kong-listed China Vanke Co. fell 0.6 percent and Evergrande Real Estate Group dived 3.9 percent.
Mainland Chinese shares slumped due to fears over slower economic growth and inflation, which “will make the market unstable in the short term,” said Li Jianfeng, an analyst at Caida Securities, based in Shanghai.
Shanghai Xinhua Media Co. lost 4 percent while Jiangsu Phoenix Publishing & Media Corp. 5.9 percent.
On Tuesday, the Dow Jones industrial average fell 0.6 percent to close at 11,954.94. The Standard & Poor’s 500 index fell 0.9 percent to 1,225.73. The Nasdaq composite fell 1.3 percent to 2,579.27.
Benchmark oil for January delivery was down 16 cents to $99.98 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose $2.37 to finish at $100.14 an ounce on the Nymex on Tuesday.
In currencies, the euro rose to $1.3047 from $1.3043 late Tuesday in New York. The dollar fell to 77.95 yen from 77.97 yen.
___
AP researcher Fu Ting contributed from Shanghai.
Diplomats frazzled by sleeplessness debated into the early hours of Sunday at a U.N. conference over a complex and far-reaching program meant to set a new course for the global fight against climate change for the coming decades.
South Africa’s foreign minister and chairman of the 194-party conference, Maite Nkoana-Mashabane, told delegates that failure to agree after 13 days of work would be an unsustainable setback for international efforts to control greenhouse gases.
“This multilateral system remains fragile and will not survive another shock,” she told a full meeting of the conference, which had been delayed more than 24 hours while ministers and senior negotiators labored over words and nuances.
The proposed Durban Platform offered answers to problems that have bedeviled global warming negotiations for years about sharing the responsibility for controlling carbon emissions and helping the world’s poorest and most climate-vulnerable nations cope with changing forces of nature.
The package must be approved by consensus, and no vote will be called. Determined opposition from even a small group of countries would unravel the deal put together after hundreds of hours of contentious negotiations.
Speakers from many developed countries said the package of documents more than 100 pages thick did not go far enough to help poor nations and did not require industrial countries to make more immediate and serious cuts in their carbon emissions. But most said they would accept it for lack of a better option.
But not Venezuela. “We all know this is a very bad agreement, that it will require more work next year and it cannot be adopted,” chief delegate Claudia Solerno said.
After weeks of being accused of obstructionism and delay, U.S. climate envoy Todd Stern voiced surprisingly strong support for the deal.
“This is a very significant package. None of us likes everything in it. Believe me, there is plenty the United States is not thrilled about,” Stern said. But the package captured important advances that would be undone if it is rejected.
Saturday afternoon, as negotiations dragged on with no sign of breakthrough, some ministers and top negotiators left Durban with no assurance of an agreement.
European Commissioner Connie Hedegaard, drawn and fatigued after two nights with minimal sleep, warned that failure in Durban would jeopardize new momentum in acting against global warming.
Introducing the package late Saturday, Nkoana-Mashabane said its four documents, which were being printed as she spoke, were an imperfect compromise, but they reflected years of negotiations on the most central political responses to global warming.
The package would give new life to the 1997 Kyoto Protocol, whose carbon emissions targets expire next year and apply only to industrial countries.
A separate document obliges major developing nations like China and India, excluded under Kyoto, to accept legally binding emissions targets in the future, by 2020 at the latest.
Together, the two documents overhaul a system designed 20 years ago that divide the world into a handful of wealthy countries facing legal obligations to reduce emissions, and the rest of the world which could undertake voluntary efforts to control carbon.
The European Union, the primary bloc falling under the Kyoto Protocol’s reduction commitments, said an extension of its targets was conditional on major developing countries also accepting limits with the same legal accountability. The 20th century division of the globe into two unequal parts was invalid in today’s world, the EU said.
The package also would set up the structure and governing bodies of a Green Climate Fund, which will receive and distribute billions of dollars promised annually to poor countries to help them adapt to changing climate conditions and to move toward low-carbon economic growth.
But the document made no specific mention of how those funds would be mobilized. Wealthy countries have pledged $100 billion a year by 2020 to poor countries, scaling up from $10 billion today.
The remaining document of more than 50 pages lays out rules for monitoring and verifying emissions reductions, protecting forests, transferring clean technologies to developing countries and scores of technical issues.
In the final hours, talks focused on unresolved differences on a clause encouraging countries to pledge greater reductions of greenhouse gases and to close what is known as the “ambition gap.” More than 80 countries have made either legally binding or voluntary pledges to control carbon emissions. But taken together, they will not go far enough to avert a potentially catastrophic rise in average temperatures this century, according to scientific modeling and projections.
Hedegaard said a lack of ambition could derail progress made on a host of other issues.
Countries had made concessions that they had resisted for years, and it would be “irresponsible” to lose that momentum now, she said.
Strong language on curbing emissions is of prime importance to small islands endangered by rising ocean levels and by many poor countries who live in extreme conditions that will be worsened by global warming.
Throughout the talks, the U.S., China and India remained stubbornly opposed to the EU’s plan to negotiate a successor to the Kyoto accord by 2020 that also would put them under legal obligations. The talks would conclude by 2015, allowing five years for it to be ratified by national legislatures. The plan insists the new agreement equally oblige all countries _ not just the few industrial powers _ to abide by emission targets.
Hours were devoted to arcane but diplomatically important questions of whether the objective of the talks was a legal “framework,” an “outcome,” or an “instrument.”
The expiring of Kyoto’s targets have hung over the U.N. process for years, and was the most contentious issue dividing rich and poor nations.
Developing countries were adamant that the Kyoto commitments continue since it is the only agreement that compels any nation to reduce emissions. Industrial countries say the document is deeply flawed because it makes no demands on heavily polluting developing countries. It was for that reason that the U.S. never ratified it.
Agreement by developing countries to accept binding targets essentially redraws the map. “That’s a very big deal,” said Samantha Smith, of WWF International. “That reflects a major macroeconomic and geopolitical change” in climate negotiations.
The chairman of the Federal Communications Commission has come out against the merger of cellphone giant AT&T and T-Mobile USA.
Julius Genachowski made his position known in a document he circulated to fellow commissioners Tuesday.
Genachowski recommended sending AT&T Inc.’s proposed $39 billion takeover of T-Mobile to an administrative law judge for review and a hearing. That’s what the FCC does when it opposes a merger.
According to an FCC official familiar with the matter, an agency analysis concluded the merger would result in higher prices for consumers, less innovation, less investment in the U.S. and fewer U.S. jobs.
The review also cast doubt on AT&T’s claim that only the merger would allow it build out “4G” high-speed wireless Internet access to cover 97 percent of the population, up from about 80 percent. The agency concluded AT&T would likely do so anyway to remain competitive with Verizon Wireless.
The official wasn’t authorized to speak publicly.
AT&T spokesman Larry Solomon said in a statement that the chairman’s action was “disappointing.”
“It is yet another example of a government agency acting to prevent billions in new investment and the creation of many thousands of new jobs at a time when the U.S. economy desperately needs both,” he said. “At this time, we are reviewing all options.”
The FCC would be the second government agency to oppose the deal. The Justice Department filed a lawsuit with the U.S. District Court in Washington in August to stop it, and that trial is expected to start Feb. 13.
Genachowski’s proposed order recommends the administrative law judge begin the hearing after the trial is done.
The deal announced in March would vault the combined No. 2 carrier AT&T and No. 4 T-Mobile into the top spot ahead of Verizon.
Dallas-based AT&T has about 101 million wireless subscribers. T-Mobile, the Bellevue, Wash.-based subsidiary of Deutsche Telekom AG of Germany, has 34 million. Verizon Wireless, a joint venture between Verizon Communications Inc. and Vodafone Group PLC, has about 108 million, while Sprint Nextel Corp. has 53 million.
The U.S. Justice Department expanded an investigatioin into Puerto Rican shipping Thursday, announcing a $14.2 million fine for a Florida-based company and a criminal charge against its former president.
Sea Star Line LLC agreed to the fine and a guilty plea to one felony count of conspiring to fix prices on cargo moving in and out of the U.S. island territory, the Justice Department said in a statement.
A federal grand jury in San Juan indicted the company’s former president and chief operating officer, Frank Peake, on a charge of conspiring to fix prices on Puerto Rico routes from late 2005 until April 2008. Peake, a New Jersey resident, is now a shipping company executive with a company affiliated with Sea Star.
Sea Star, based in Jacksonville, Florida, issued a statement apologizing to its customers, and noted the agreement provides that the Justice Department will not bring criminal charges against its parent companies, Saltchuk Resources Inc. and American Shipping Group Inc.
Sea Star employees engaged in the price-fixing scheme in violation of company policies, but the company is still responsible for the conduct under antitrust law, said Anthony Chiarello, President of American Shipping Group Inc.
“We extend sincere apologies to all of our loyal customers and the consumers who were affected by this conduct,” Chiarello said in the statement. “It was contrary to everything that Sea Star stands for and will not be tolerated in the future.”
He said by email that he was unable to answer questions because he was traveling.
David Oscar Markus, a lawyer for Peake, said his client denies wrongdoing and expressed confidence his client will be cleared of a charge that carries a maximum sentence of 10 years in prison.
“Frank is innocent. He is never going to do a day in jail because he didn’t do the things they said he did,” said Markus, based in Miami. “It’s a real shame that the government is wasting its resources on something like this.”
Peake is accused of meeting with unidentified others in his industry to allocate customers and set prices for freight services for government and commercial clients, according to the indictment.
As part of the agreement, which is subject to court approval, Sea Star admitted conspiring to set prices and rig bids between May 2002 and April 2008, according to court papers.
Last April, the investigation brought a $15 million fine for Horizon Lines LLC of Charlotte, North Carolina. Five former executives of Sea Star and Horizon have received fines and jail sentences stemming from the probe.
Fierce competition for top-tier credit card customers appears to be leading some banks to look in elsewhere for new business: borrowers with spotty credit histories.
Data shows that more new cards went to consumers with less-than-stellar credit scores in the third quarter, while fewer new cards went to those with the best scores.
In the three months ended Sept. 30, credit reporting agency TransUnion found that 25.2 percent of the new card accounts went to consumers with a score below 700.
That was up from 23 percent of cards going to riskier borrowers in the same quarter of 2010.
That translates into almost a quarter million more cards going to consumers who have had some trouble with credit in the past, according to Ezra Becker, vice president of research and consulting in TransUnion’s financial services business unit.
And since TransUnion found that the overall number of cards opened during the quarter was essentially flat from a year ago, that means those were cards that did not go to more creditworthy consumers. In fact, the number of new card accounts opened by borrowers with scores of 800 or better slipped to 45.9 percent, from 49.7 percent a year ago.
The findings were based on the VantageScore system for measuring creditworthiness developed by TransUnion and its peers Experian and Equifax as an alternative to the better-known FICO score. VantageScore says its system, which uses a scale of 501 to 990 and awards higher scores to the least risky borrowers, is used by the top five credit card issuers in the country.
Like FICO, VantageScore’s ratings are based a number of factors regarding an individual’s past use of credit, including their history of making on-time payments, keeping balances below credit limits and the length of their credit history.
Scores around 700 would merit a “C” on the VantageScore scale, which implies that those borrowers had some problems making payments or ran up balances in the past.
Opening up new credit to struggling consumers is an important step. A year ago, TransUnion said about 8 million people had left the credit card market in the prior 12 months, either by choice or because their cards were shut down.
The uptick in lending to consumers who have had trouble with payments in the past “counteracts everything that’s been happening in the last few years,” said Bill Hardekopf, CEO of the card comparison site LowCards.com. He noted that demand is high for consumers in that group because of the dearth of available credit in recent years.
Meanwhile, card companies have been pushing ever-more-enticing offers to consumers with the best scores _ beefing up rewards, trimming interest rates and lengthening the time for no- or low-interest balance transfers. About 80 percent of all new card offers go to those with the top credit scores, according to market research firm Synovate.
But those same top-tier borrowers aren’t trying to open as many new accounts or increase their balances faxless payday advance. “They have plenty of credit available to them,” Becker said, noting that card users have been paying down their balances. In the third quarter, TransUnion found the average combined balance on bank-issued credit cards _ MasterCard, Visa, American Express and Discover_ fell 4.1 percent to $4,762, from $4,964 last year.
Data from credit card companies also shows that while the most affluent consumers are using their cards more, they’re also paying off their balances in full each month.
That means that to increase profits in their card businesses, banks need to find new borrowers who will pay higher interest rates and are more likely to carry balances each month.
“If financial institutions are going to grow, eventually they’re going to have to dip their toes into the water of riskier borrowers,” said Greg McBride, senior financial analyst for Bankrate.com, which tracks credit offers.
Another factor that’s likely playing into more willingness to lend to consumers with lower scores is that there are more individuals on the riskier end of the scale due to the lengthy economic downturn, high unemployment and ongoing foreclosure crisis, noted Bruce McClary, a spokesman for ClearPoint Credit Counseling Solutions. “Sooner or later the people who got bumped out of the credit world have to start re-establishing credit,” he said.
One problem is that the increase in higher-risk borrowers also had an immediate impact on the rate of late payments during the quarter.
TransUnion found that the rate of payments late by 90 days or more _ known in the industry as the delinquency rate _ rose to 0.71 percent, from 0.60 percent in the second quarter.
That’s still down from 0.83 percent in the third quarter a year ago, and a long way off from the 1.32 percent peak in delinquency recorded in the first quarter of 2009.
Although the delinquency rate in the third quarter was still below the historical norm _ the second-quarter rate was the lowest seen since 1994 _ it marks the first quarter-over-quarter increase in almost two years.
“When you have such low delinquency, there’s generally only one direction you can go,” Becker observed. Plus, lenders must take risks if they want to earn anything. If lenders wanted to achieve zero delinquency, he said, they would have to stop lending.
The expansion of new card offers to riskier borrowers also present an interesting bit of timing for the industry, notes Hardekopf.
Card companies “want to get these cards in their hands so they have the ability to use them during the holiday season,” he said. “The time when we all put more on our cards is the fourth quarter.”
Who feels like a panini?
Sorry, this column isn’t about the panini you eat, rather the one you are — that is if you are a member of the sandwich generation with aging parents or other family members who need assistance and children, often into their mid to late 20s, still partially or completely dependent financially.
In 2002, Statistics Canada estimated that 2.6 million Canadians between the ages of 45 and 64 had children under 25 living with them and approximately 27 per cent of them were also providing some kind of elder care. After the financial collapse and recession the trend has accelerated.
Many of my friends are being sandwiched, as am I. My youngest daughter, nearly 26, is deaf. She’s still at college and may require financial help for some time to come. Until recently, my parents also needed considerable care. My mother died in 2009 and, fortunately, my father is relatively healthy and able to live in a nice retirement home. But now and then, the needs of daughter and father collide with my own busy life and I feel pulled in a dozen directions.
Most of those sandwiched between two generations are baby boomers, the first of whom started collecting their old-age pension in 2011. The advancing wave of this group is bringing with it a whole set of new financial challenges. “My daughter and son have student loans of $42,000 between the two of them. Despite their best efforts they’re semi-employed and living in an expensive city (Toronto),” Helen, 59, emailed recently. Helen is widowed and lives in a small northern Ontario town where jobs are limited. “I have enough to retire in a couple of years but not if I help them, especially if their situations don’t improve pretty fast. But I can’t see turning my back on them.”
The choices being forced on the sandwich generation often leave the caregivers feeling damned if they do or don’t. Should I stop RRSP contributions to help my family? Do I postpone my retirement? Will my employer let me go if I take time off to care for my parents? Should I withdraw from my savings? Do I kick out my kids so I can downsize?
Many of the difficulties facing sandwiched boomers are magnified for entrepreneurs. Even with great employees the buck stops with the boss and stepping away is rarely a satisfactory option.
Winnipeg-based bestselling tax author and president of the Knowledge Bureau, Evelyn Jacks juggled a successful business while being the primary caregiver of two ailing family members and also involved with the care of two others. All four died over an 18-month period. “Caring for the sick and the dying is difficult and exhausting and so sharing the journey with your support network is very important,” she says in retrospect.
“A strategic, consistent and all-inclusive communications plan within the family is very important. When everyone stays in the loop in an orderly way — we used email a lot to cover all the time zones — everyone can seamlessly step in as required. It also means everyone needs to work hard to stay healthy — physically and emotionally — in very stressful times.”
Being sandwiched between the needs of two and sometimes three generations isn’t a new phenomenon. My parents brought “the grannies,” as we called them, from England while I was young. One drank like a fish and gave away money to whomever asked and the other frequently wandered off only to be found settled on someone’s porch happily singing “It’s a Long Way to Tipperary”.
But the extended care-giving facing the boomers is unique because this generation is so large, our parents are living longer and our children carry a far higher student debt load than past generations. According to a 2010 Vanier Institute of the Family Study, university graduates have $18,000 in student loans, not including family debt or lines of credit.
To compound the problem young adults are also earning less relatively. Statistics Canada figures show that the wages of those 20 to 34, across all levels of education levels declined significantly in the 1980s and the trend has continued to present day, though at a slower pace.
These financial and emotional stresses prompted Credit Canada, the country’s leading not-for-profit credit counselling charity, to choose the sandwich generation as the theme for its fifth Credit Education Week — part of November’s Financial Literacy Money, which kicks off on Nov. 14.
“Credit Canada has seen more and more people trying to support their children and aging parents who don’t have the income to support themselves while struggling to pay their own bills including their children’s education,” notes executive director Laurie Campbell.
Credit Education Week Canada has published a very useful magazine, The Sandwich Generation. Among some of the do’s and don’ts to avoid being crippled emotionally and financially:
1. Set up a power of attorney
2. Update wills and ensure health-care directives are in place
3. Consolidate the debts and assets of the elderly to make management simpler
4. Don’t bleed your own savings, especially RRSPs, or increase your debt load (except in the direst circumstances) for the young or the old
5. Don’t allow unemployed kids to hang out at home doing nothing.
6. Don’t excuse siblings or other relatives from their responsibility
Let’s wait and see.
That’s likely to be the message from the Federal Reserve on Wednesday, when its two-day policy meeting ends. Few expect any bold new steps to be announced.
Fed policymakers likely want to gauge the impact of action they’ve taken recently to keep interest rates low. The Fed has breathing room because the economy and stock markets have strengthened enough to allay fears of another recession.
After their September meeting, the policymakers said they would shuffle the Fed’s investment portfolio to try to further reduce long-term interest rates. And in their previous meeting in August, they had said they plan to keep short-term rates near zero until at least mid-2013 unless the economy improved.
“They know they are running out of tools, so they don’t want to employ another one unless they have to,” said David Wyss, former chief economist at Standard & Poor’s.
At its last meeting, the Fed left open the possibility of taking additional action to try to help the economy. One option is to further explain the steps it has already taken and their purposes. Another would be to launch a third program of bond purchases.
But the Fed remains deeply divided over what, if any, action to take, which is another reason economists don’t expect any major announcements this week.
The actions taken in August and September were adopted on 7-3 votes, the most dissents in nearly 20 years.
Three regional bank presidents _ Richard Fisher of Dallas, Charles Plosser of Philadelphia and Narayana Kocherlakota of Minneapolis _ all voted no. They have expressed concerns that the Fed’s policies could lead to high inflation later.
On the other hand, four policymakers are worried that the Fed might not be doing enough. Vice Chair Janet Yellen, Governor Daniel Tarullo, Chicago Fed President Charles Evans and New York Fed President William Dudley have said the economy is at risk and might need more support.
“I have never seen the Fed more deeply divided than it is at this moment,” said David Jones, head of DMJ Advisors and the author of books on the Fed.
At its meeting in September, the Fed stopped short of expanding its portfolio of investments. Instead, it opted to shuffle $400 billion of its investments to try to lower long-term rates.
But two officials pushed for bolder action, according to minutes of the meeting. The members discussed more bond-buying. Some said it should remain an option.
A brighter outlook for the economy has given the Fed more room to wait. The economy grew at an annual rate of 2.5 percent in the July-September period _ the best quarterly performance in a year.
That’s strong enough to show that the economy isn’t about to slide into recession. Still, growth would have to be nearly twice as high _ consistently _ to make a major dent in the unemployment rate, which has been stuck at 9.1 percent for three straight months.
Stocks have rallied of late. Even after a drop of nearly 2.5 percent Monday, the Standard & Poor’s 500 stock index in October notched its best one-month showing since December 1991.
European leaders have also announced a debt agreement that could help prevent a financial catastrophe on the continent. Still, even if it does, many analysts don’t think Europe can avoid another recession.
Many economists think the Fed will hold off on new action until its December meeting or early next year. The next step could be further clarity on its interest-rate policy.
Evans has proposed that the Fed set benchmarks for raising rates. For example, it could agree not to raise short-term rates until unemployment fell below 7 percent or the outlook for inflation exceeded 3 percent. The unemployment rate has hovered around 9 percent for more than two years, and the Fed’s inflation outlook is under 2 percent.
Yellen, who heads a Fed panel that is examining ways to improve the central bank’s communications, says the idea should be examined. But she cautioned that such benchmarks could confuse investors.
She has suggested that the Fed could add further guidance when it provides its economic forecasts four times a year. The forecast offers estimates for growth, unemployment and inflation. It does not forecast interest rates.
Mark Zandi, chief economist at Moody’s Analytics, said that adding a Fed forecast on the federal funds rate, its main policy lever, would reassure investors about when it might move interest rates.
“They have given investors more clarity about the timing of future rates, but including an actual forecast of when rates might change would help bring rates down further,” Zandi said.
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