Analysts at Cornerstone Worldwide, the Asian-based investment group are thought to believe that the Federal Reserve’s decision to extend its emergency lending programs to Wall Street firms demonstrates that the turmoil that has blighted the financial markets over the last year is set to continue.
Cornerstone Worldwide have remained bearish on the financials most affected by the carnage wrought by the credit crunch despite the many economists’ assertions that the worst of the crisis was over.
The US central bank has been pumping liquidity into the system but normal activity has, so far, failed to resume said the Cornerstone Worldwide sources.
Both the Primary Dealer Credit Facility for direct loans to securities firms and the Term Securities Lending Facility for loans of Treasuries, both in operation since March, will now extend through Jan. 30 2009. If, at that time, the Fed deems that markets ``are no longer unusual and exigent,'' the Fed said in a statement in Washington, the facilities would then be cancelled.
Policy makers are expected to keep their benchmark rate at 2 percent when the FOMC meets again on Aug. 5 although the Cornerstone Worldwide source said that traders still see a 71 percent chance of at least a quarter-point increase by year-end, futures prices show.
