Further cuts to US interest rates "unlikely"; AIG head to testify before Congress; Chinese economic forecast takes a hit; questions about Iran arms trade; Sharia courts in Pakistan's Swat Valley; and more
Top of the Agenda: Economic Policy in Washington
The U.S. Federal Reserve concludes two days of meetings today and policymakers are watching closely for signs of what the Fed will do next to confront the financial crisis. The Wall Street Journal reports that with the bank's benchmark interest rate at near zero, further cuts seem off the table. The Fed could achieve the same effect as lowering rates, however, the Journal reports, by buying more assets to flood the financial system with cash. Bloomberg says such an effort might focus on purchases of mortgage securities and other assets. The Fed's asset base has already burgeoned to around $2 trillion, but the Journal quotes one economist from Goldman Sachs saying the Fed would have to buy enough securities to effect the equivalent of slashing rates eight more points by 2010 in order to stave off deflation--a process the paper says could require expanding Fed assets to an "eye-popping $10 trillion."
Meanwhile, the Financial Times reports U.S. Treasury Secretary Timothy Geithner will face a "critical test of his credibility" in the next few days as he releases details of a much-awaited plan to help take toxic assets off bank balance sheets. The paper notes that Geithner's original announcement about the plan, last month, drew criticism from policymakers and disappointed markets.
Tensions are also rising today as Edward Liddy, the head of the insurance firm AIG, prepares to testify before Congress. The New York Times reports Liddy will face sharp questions about giving large bonuses to executives after receiving major outlays of taxpayer money.
Background:
- A new three-part photo timeline from CFR.org looks at how the financial crisis unfolded, the history of financial regulation, and the history of economic theory.
PACIFIC RIM: China's Economic Forecast
The World Bank cut its forecast for Chinese economic growth in 2009, dropping it to 6.5 percent (FT) from the 7.5 percent it had predicted before. Chinese officials recently stood by their own, higher forecasts, saying the country's economy would meet its target growth rate of 8 percent this year.
U.S.-N.KOREA: Washington says Pyongyang has refused to accept U.S. food aid (Yonhap) as tensions surrounding Pyongyang's planned "satellite" launch escalate.
ELSEWHERE:
- Russian official's comments feed questions about Iran arms trade.
- Sharia courts implemented in Pakistan's Swat valley. 
This is an excerpt of the CFR.org Daily News Brief. The full version is available on CFR.org.