What the Fed is mulling at this week’s meeting
The Federal Reserve meets this week against an improving economic backdrop, but with inflation not an imminent threat, the U.S. central bank is seen as in no hurry to raise interest rates.
Economists expect the policy-setting Federal Open Market Committee to hold the target range for overnight interest rates steady at zero to 0.25 percent until at least 2010.
A statement outlining the Fed’s policy decision is expected at around 2:15 p.m. EDT on Wednesday, at the end of a two-day meeting.
Fed Chairman Ben Bernanke said earlier this month that the worst U.S. recession since the Great Depression was “very likely” over, but that the recovery would be slow and would take time to create new jobs.
Below is some recent data the Fed will consider:
ECONOMY
There have been signs of economic recovery in data released since the Fed’s last policy meeting on August 11-12.
- An index measuring the U.S. economy’s prospects rose for a fifth straight month in August to a 1-1/2 year high as stock prices surged, data from private research group The Conference Board showed on Wednesday.
- Retail sales climbed 2.7 percent in July, the biggest monthly advance since January 2006, the Commerce Department said american family insurance.
- The preliminary September Reuters/University of Michigan Surveys of Consumers sentiment index rose to 70.2, the highest since June.
- The New York Federal Reserve Bank’s “Empire State” business conditions index, which gauges manufacturing activity in New York State, rose to 18.88 in September, the highest level since November 2007. The survey is one of the earliest monthly guideposts to U.S. factory conditions.
But the positive news was by no means across-the-board: the U.S. unemployment rate hit a 26-year high of 9.7 percent last month.
Housing data has been mixed, suggesting some stability in the hard-hit sector but no firm revival.
In August, U.S. housing starts and permits for future building hit their highest level since November. The data reflected a rebound in multifamily homebuilding activity, though groundbreaking for single-family homes fell 3 percent.
While economists generally agree an economic recovery is underway, many continue to question its sustainability given its current reliance on monetary and fiscal stimulus measures.
Filed under: money by Fred