| Cleveland Fed chief lays out U.S. financial problems
The housing boom and bust, changes in the structure of the mortgage markets and the role of highly leveraged financial institutions have all added to the current financial turmoil the U.S. is facing, said Sandra Pianalto, president and chief executive officer of the Federal Reserve Bank of Cleveland. Pianalto addressed the current financial situation and the Federal Reserve's role in helping survive financial distress during the University of Dayton's eighth-annual Student Investment RISE Forum Thursday at UD Arena. "The financial markets are undergoing a great deal of stress and it's a challenging and interesting time to be policy makers," she said. Pianalto said the housing boom and bust is not unusual at a local or regional level. For example, in the early 1990's, Massachusetts and California saw foreclosure rates rise and remain high while housing prices fell for several years.
Elderly 'face inflation trap'
Simon Little, Home & Capital�s business development director, said: �Many elderly people just couldn�t believe the government figures saying that inflation was as low as 2.5%. People who live on a low and fixed income know only too well that their purses and wallets are increasingly stretched by the soaring cost of gas and electricity, and many staple food items that are going up in price very sharply.� Indeed, the average increase in gas prices in 2008 among the top six UK energy companies was over 15% and one of them put through a 17.2% rise. Electricity prices were not far behind. Little said: �It�s been calculated the average energy bill for a British consumer is now well over �1,000. As we all know, older people tend to feel the cold and are often at home all day, so they inevitably use more energy, particularly if they live in an older property without modern energy-saving devices such as double glazing and loft insulation.
RBA backs banks in pushing up rates
The Reserve Bank of Australia has defended the major banks for increasing lending rates beyond official cash rate moves. The central bank said Australia's financial sector was likely to withstand the global credit turmoil which has forced up borrowing costs. RBA governor Glenn Stevens told a financial markets conference in Sydney on Thursday it was unrealistic to expect the banks to move their lending rates only in line with the official cash rate because international borrowing costs had climbed. "The presumption that their lending rates would and should move only in line with the cash rate, which had arisen in an earlier period when all these rates were much more closely related, has not been a realistic one in the recent environment," he said. The major banks raised their variable mortgage rates during March by between 30 and 38 basis points.
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