This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

Fed's Work Remains Unfinished

Despite signs that employment and spending weakened in November, the Federal Reserve is likely to forge ahead with a quarter-point interest rate hike on Tuesday, its fifth in as many meetings.

In addition, central bankers are expected to leave their policy statement largely intact, suggesting that more hikes could be on the way in 2005.

Traders are almost fully pricing in a 25-basis-point move this week, which would leave the funds rate at 2.25%, up from 1% in June. The odds for a rate hike in February and March are also very high.

"I don't see anything to throw them off the path of steady, measured increases," said Alexander Paris, an economist at Barrington Research. "Interest rates are probably still too low."

With the economy growing at a respectable pace, Paris said there is no need for the stimulus that was put in place after the recession and terrorist attacks three years ago. Economists surveyed by Bloomberg News recently raised their estimates for fourth-quarter growth to 3.8% from 3.5%, citing a sharp decline in oil prices.

Paris also noted that the falling dollar has become a growing concern. In November, Fed Chairman Alan Greenspan said that if foreign demand for U.S. assets wanes amid a burgeoning trade deficit, interest rates would have to rise to attract foreign capital, or the country would be forced to import less.

Meanwhile, an article in The Wall Street Journal early this month suggested that some Fed officials are increasingly worried about inflation. Concerns center around high commodity prices, slowing productivity and the weak dollar, which raises import costs.

Still, Bill Dudley, an economist at Goldman Sachs, doesn't expect the Fed to change its assessment that the "upside and downside risks" to inflation are "roughly equal."

"My view is that it is premature to expect a change in the balance-of-risks statement," he said.

Indeed, inflation data have generally remained tame recently. In October, the core personal consumption expenditure index, the Fed's preferred measure of inflation, rose just 1.5% on a year-over-year basis.

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
AAPL $126.41 0.00%
FB $81.21 0.00%
GOOG $575.33 0.00%
TSLA $200.63 0.00%
YHOO $44.16 0.00%


DOW 18,135.72 +38.82 0.21%
S&P 500 2,101.04 +2.51 0.12%
NASDAQ 4,982.8090 +15.6680 0.32%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs