Greenspan's Unfinished Job

Most prominently, the freshest economic data suggest that fourth-quarter weakness will be followed by a rebound.

Last week, an unexpected gain in December durable goods orders lent credence to the idea that capital spending may continue to pick up this year. Also last week, an unexpected increase in new-home sales supported the scenario of a soft landing for the housing market.

Meanwhile, Monday brought news that consumer spending increased 0.9% in December, more than the 0.7% the market expected, and compared with an upwardly revised 0.5% in November.

The deflator for personal consumption expenditures, used by the Fed as a gauge of inflation, rose at a 2.2% annualized pace, above the 1.75% to 2.0% range preferred by the central bank.

That may spell goods things for consumption, but hardly seems to confirm expectations that the Fed will soon be going on hold.

Still, Tuesday's statement from the FOMC will likely comfort the optimists. Because Fed members will want to leave Ben Bernanke as much wiggle room (technical term) as possible, the statement is likely to be even more noncommittal than usual. In addition, the next FOMC meeting after Tuesday is two months away, an unusually long period of time between meetings.

"Lots of important info has yet to be released, and it would be nice to give [Bernanke] and the Fed as much flexibility as possible to respond to all this," says Jan Hatzius, chief U.S. economist at Goldman Sachs.

A "dovish" statement will also likely refer to the softer economic data recently seen. Besides Friday's weak fourth-quarter GDP report, the December employment report showed the economy added only 108,000 jobs.