Coming Week: Spotlight on Central Banks

The Fed's last policy meeting in late January came against the backdrop of a solid jobs report and strong advanced fourth-quarter GDP report. Since then, the four-week average of weekly jobless claims has hit its highest level since October 2005, fourth-quarter GDP has been revised down substantially and "the subprime mortgage issue has raced to the forefront of minds of the public, the media and the market," writes Joseph Brusuelas, chief U.S. economist at IDEAglobal. "What a difference six weeks makes."

By the end of the week, fears of a subprime mortgage meltdown were diminishing somewhat, thanks largely to comments from Goldman Sachs(GS Quote), Lehman Brothers(LEH Quote) and Bear Stearns(BSC Quote). To varying degrees, each big broker said it was insulated from the low-end mortgage market and actually saw opportunities to profit from the upheaval.

Also having a calming influence was Friday's news from Accredited Home Lenders (LEND Quote) that it has agreed to sell $2.7 billion of loans to an unnamed buyer and from Fremont General(FMT Quote) that it got a credit line increase from Credit Suisse. Thursday brought news that PHH(PHH Quote) is being acquired by General Electric(GE Quote), which will sell PHH's mortgage operations to an affiliate of the Blackstone Group.

Still, the Fed is expected to acknowledge that it is at least monitoring the subprime situation in its statement. "We expect the committee to create a tone of consistency and one that clearly communicates its resolve to remain tough on inflation, but will between the lines signal to the market that it too is concerned with evolving events in the financial sector," writes Brusuelas. (For more on the economists' outlook for Fed policy and analysis of recent data, check out Thursday's Real Story podcast.)