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The U.S. Federal Open Market Committee has cut its key lending rate today, slashing the target range for federal funds to a band of zero to 0.25%. The discount rate has reduced by 75 basis points to 0.50%.

“Since the Committee’s last meeting, labor market conditions have deteriorated, and the available data indicate that consumer spending, business investment, and industrial production have declined,” the Fed said in its decision. “Financial markets remain quite strained and credit conditions tight. Overall, the outlook for economic activity has weakened further.”

More ominous still, the Fed vowed to “employ all available tools to promote the resumption of sustainable economic growth.” With the Fed funds rate just 25 basis point above zero, further rate cuts are virtually out of the question.

“The focus of the Committee’s policy going forward will be to support the functioning of financial markets and stimulate the economy through open market operations and other measures that sustain the size of the Federal Reserve’s balance sheet at a high level,” the committee said. “As previously announced, over the next few quarters the Federal Reserve will purchase large quantities of agency debt and mortgage-backed securities to provide support to the mortgage and housing markets, and it stands ready to expand its purchases of agency debt and mortgage-backed securities as conditions warrant.”

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Household net worth falls

Don’t expect any sudden turnaround in the economic fortunes of the country in 2009. The new year will see a 0.5% economic contraction, according to a report out of Laurentian Bank.

“Exports, imports, residential construction and business investment are all expected to pull back,” say report authors Carlos Leitao, chief economist and strategist, and Sébastien Lavoie, economist, Laurentian Bank Securities.

As the U.S. recession deepens, Canadian unemployment is expected to rise to 7.0% from its current level of 6.3%.

“Amid economic uncertainties, households will be more prudent and ease the pedal on spending,” the authors write.

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New SRO to oversee deposit brokers

A new self-regulatory organization is set to begin operations in 2009, as the Registered Deposit Brokers Association has garnered “support from the overwhelming majority of financial institutions” that it will regulate.

The RDBA, a reincarnation of the Federation of Canadian Independent Deposit Brokers, is currently working to finalize its rules and regulations.

The body will regulate independent financial professionals who specialize in guaranteed investment products such as GICs, term deposits, RRSPs, RRIFs and LIFs. The RDBA estimates there are 3,500 individuals in the business nationwide, placing some $30 billion in deposits.

“By taking on this challenge, with the input of the deposit brokers who have to implement these rules, we end up with a regulatory framework that is far more business-friendly than what might occur if the task is left to isolated securities regulators,” says Mary Rygiel, a deposit broker and director and president of the RDBA.

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Scotia names new manager on climate change fund

Scotia Securities Inc. has announced the appointment of F&C Management Limited as portfolio advisor for the Scotia Global Climate Change Fund.

“Global climate change is a reality that has the potential to impact the way we live, the companies where we work and the way in which we invest our money,” said Glen Gowland, managing director and head, ScotiaFunds and president and CEO of Scotia Securities.

F&C currently manages in excess of $166 billion U.S. worldwide and $5.9 billion in sustainable managed assets.

F&C replaces State Street Global Advisors as manager of the fund. There will be no change to the investment objectives or investment strategies of the fund.

The Scotia Global Climate Change Fund has lost 38.61% in the past six months, the fund’s longest reportable time horizon.

(12/16/08)