At secret meeting, Fed considered buying everything and holding press briefings

Section:

Fed Considered Long-Term Rate Target in Secret

By Robin Harding
Financial Times, London
Tuesday, November 23, 2010

http://www.ft.com/cms/s/0/63b58a42-f737-11df-9b06-00144feab49a.html#axzz...

The US Federal Reserve considered a radical change to its monetary policy at an unannounced meeting in mid-October that could have committed it to buying an unlimited amount of securities, according to the minutes of its November meeting.

At the October 15 meeting, held by video conference, the Fed discussed whether it should target a long-term interest rate, suggesting this could be an option if inflation continued to fall in the face of the central bank's new $600 billion round of quantitative easing, nicknamed QE2. But the meeting rejected the policy change.

Targeting a long-term interest rate -- fixing the 10-year yield at 2.5 per cent, for example -- would commit the Fed to buying an unlimited amount of Treasury securities if the public wanted to sell them at that price. At the moment, the Fed can choose to buy more or less than $600 billion, but with a long-term rate target it might lose control of the size of its balance sheet.

... Dispatch continues below ...



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Prophecy Receives Permit To Mine at Ulaan Ovoo in Mongolia

VANCOUVER, British Columbia -- Prophecy Resource Corp. (TSX-V:PCY, OTCQX: PRPCF, Frankfurt: 1P2) announces that on November 9, 2010, it received the final permit to commence mining operations at its Ulaan Ovoo coal project in Mongolia. Prophecy is one of few international mining companies to achieve such a milestone. The mine is production-ready, with a mine opening ceremony scheduled for November 20.

Prophecy CEO John Lee said: "I thank the government of Mongolia for the expeditious way this permit was issued. The opening of Ulaan Ovoo is a testament to the industrious and skilled workforce in Mongolia. Prophecy directly and indirectly (through Leighton Asia) employs more than 65 competent Mongolian nationals and four expatriots. The company also reaffirms its commitment to deliver coal to the local Edernet and Darkhan power plants in Mongolia."

The Ulaan Ovoo open pit mine is 10 kilometers from the Russian border and within 120km of the Nauski TransSiberian railway station, enabling transportation of coal to Russia and its eastern seaports. Thermal coal prices are trading at two-year highs at Russian seaports due to strong demand from Asian economies.

For the complete press release, please visit:

http://prophecyresource.com/news_2010_nov11.php



Some members of the rate-setting open market committee noted this option "could be an effective way to reduce longer-term interest rates." But members "also noted potentially large risks, including the risk the Fed might find itself buying undesirably large amounts of the relevant security."

At the meeting, the Fed's open market committee also discussed whether chairman Ben Bernanke should start to hold regular press briefings to improve its communications with the public and whether to adopt a numerical inflation objective or a target path for the price level.

The Fed has kept the video conference a secret for the past month. It means that the FOMC had already discussed many of the important issues about QE2 before the November meeting at which it was launched.

The minutes said "most" members had agreed with the decision to launch QE2 but differed on the risks to the economy and the likely costs and benefits of buying more long-term securities.

"Most" members judged it would ease financial conditions and that would spur economic growth, but "some" thought that it would have "only a limited effect on the pace of the recovery."

FOMC members slashed their growth and inflation forecasts for the next few years and sharply increased their expectations of unemployment.

In a crucial argument supporting the case for QE2, most of the FOMC forecast that core inflation in 2013 will be between 1.1 and 2 per cent. That justifies action because he Fed's objective is "about 2 per cent or a bit below."

The committee also expects to miss its other goal on jobs with unemployment forecast to be between 7.7 and 8.2 per cent at the end of 2012 -- up from a June forecast of 7.1 to 7.5 per cent -- and 6.9 to 7.4 per cent at the end of 2013.

A few committee members also increased their estimate of the number of people who will remain out of work once the economy has fully recovered.

The "central tendency" estimate -- which excludes the three highest and three lowest forecasts by individual FOMC members -- rose from between 5 and 5.3 per cent to between 5 and 6 per cent.

Most FOMC members now expect growth of between 3 and 3.6 per cent in 2011 compared with the 3.5 to 4.2 per cent that they forecast in June, but they remain optimistic that growth will accelerate to about 4 per cent in 2012.

The Fed staff also revised up their growth forecasts because of the anticipated effects of quantitative easing.

The minutes also say that the Fed has launched a review of its communication guidelines "with the aim of ensuring that the public is well informed about monetary policy issues while preserving the necessary confidentiality of policy discussions until their scheduled release."

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Sona Drills 85.4g Gold/Ton Over 4 Metres at Elizabeth Gold Deposit,
Extending the Mineralization of the Southwest Vein on the Property

Company Press Release, October 27, 2010

VANCOUVER, British Columbia -- Sona Resources Corp. reports on five drillling holes in the third round of assay results from the recently completed drill program at its 100 percent-owned Elizabeth Gold Deposit Property in the Lillooet Mining District of southern British Columbia. Highlights from the diamond drilling include:

-- Hole E10-66 intersected 17.4g gold/ton over 1.54 metres.

-- Hole E10-67 intersected 96.4g gold/ton over 2.5 metres, including one assay interval of 383g of gold/ton over 0.5 metres.

-- Hole E10-69 intersected 85.4g gold/ton over 4.03 metres, including one assay interval of 230g gold/ton over 1 metre.

Four drill holes, E10-66 to E10-69, targeted the southwestern end of the Southwest Vein, and three of the holes have expanded the mineralized zone in that direction. The Southwest Vein gold mineralization has now been intersected over a strike length of 325 metres, with the deepest hole drilled less than 200 metres from surface. "The assay results from the Southwest Zone quartz vein continue to be extremely positive," says John P. Thompson, Sona's president and CEO. "We are expanding the Southwest Vein, and this high-grade gold mineralization remains wide open down dip and along strike to the southwest."

For the company's full press release, please visit:

http://sonaresources.com/_resources/news/SONA_NR19_2010.pdf