Fed Rate Action Commentary From Swiss Re US Senior Economist

NEW YORK, Aug. 5 /PRNewswire/ -- After today's decision by the Federal Reserve
to hold the target fed funds rate at 2.0%, Swiss Re's senior US Economist,
Arun Raha, commented, "The Fed is caught between fears of inflation and
financial market uncertainty. It cannot ease any further because that would be
inflationary, but tightening at this time would be premature. Economic
activity is expected to weaken in the second half of the year and bank balance
sheets remain fragile - so tightening would only aggravate the downturn.
Moreover, wage pressures remain benign and oil prices have eased from their
peaks. The Fed is likely to be on hold until next year when growth picks up.
Currently, there is substantial monetary easing in the pipeline, which should
boost economic activity by early next year."
"The economy's outlook remains very tentative, despite the positive second
quarter. Financial markets are still stressed, we have had seven consecutive
months of job losses, housing starts and car sales are at recessionary levels,
factory orders excluding defense remain weak, and the outlook for consumer
spending after the rebate checks have been spent, is none too bright. We
expect a weak second half this year with the possibility of a negative fourth
quarter," Raha said.
"Globally, inflation concerns now mostly outweigh worries about slowing
growth. In Euroland, inflation is expected to average 3.7% this year - above
the European Central Bank's 2.0% target. In the U.K., inflation is forecast to
be 3.6%, also above target. The ECB raised rates by 25 basis points and will
likely be on hold until next year when rate cuts are expected, and the Bank of
England as well as the Bank of Canada have halted their easing for now. Japan
is holding off on a possible rate hike because of growing concerns over
slowing economic growth. Inflation is not yet a concern in Japan, as core
inflation is close to zero. The US dollar is expected to strengthen modestly
against the euro, the British pound, and the Canadian dollar over the next 18
months, but continue to depreciate against Asian currencies. China continues
to maintain robust economic growth but headline inflation has accelerated to
7.9% in the first half and will remain a major concern for the rest of the
year. Recent difficulties facing Chinese exports hint that the pace of yuan
appreciation could moderate going forward," added Raha.

Swiss Reinsurance Company Ltd
Swiss Re is a leading and highly diversified global reinsurer. The company
operates through offices in more than 25 countries. Founded in Zurich,
Switzerland, in 1863, Swiss Re offers financial services products that enable
risk-taking essential to enterprise and progress. The company's traditional
reinsurance products and related services for property and casualty, as well
as the life and health business are complemented by insurance-based corporate
finance solutions and supplementary services for comprehensive risk
management. Swiss Re is rated "AA-" by Standard & Poor's, "Aa2" by Moody's and
"A+" by A.M. Best.

SOURCE Swiss Reinsurance Company Ltd

Alayna Tagariello, Swiss Reinsurance Company Ltd , +1-212-317-5663,
Alayna_Tagariello@swissre.com