Fed Reports Sluggish Economic Growth
NEW YORK ( TheStreet) - The Federal Reserve's Beige Book showed weak to modest economic expansion in the central bank's twelve districts over the latter part of the summer, leaving the door open to an announcement of further Fed action in late September.
Consumer spending edged up in most of the districts while manufacturing conditions slowed in many regions. Meanwhile, "several districts... indicated that recent stock market volatility and increased economic uncertainty had led many contacts to downgrade or become more cautious about their near-term outlooks," according to the report.
The labor market was "generally stable," with some districts reporting "modest employment growth." The jobs market saw some growth within the health care and energy industries.
While the Beige Book did not indicate a double-dip recession, it confirmed a sluggish U.S. economy. Stocks were little changed on the report as it did not contain new details that would give ammunition to the argument for further quantitative easing.Ahead of the Fed's late September meeting, investors are eagerly awaiting a possible announcement of Operation Twist, where the central bank would sell short-term assets to fill its portfolio with longer-term Treasuries. Already, Fed chief Ben Bernanke's announcement last month that the Fed would lengthen its usual September meeting to two days has given investors hope that the Fed will serious considering some form of monetary easing. The minutes of the Fed's last policy meeting revealed deep divisions between the banks members over the economic outlook and whether the Fed should take action. Those that favor additional stimulus include Federal Reserve Bank of Chicago President Charles Evans and Boston Fed President Eric Rosengren. On the other hand, Dallas Fed President Richard Fisher and Philadelphia Fed President Charles Plosser have argued that more easing would lead to high inflation, among other unfavorable consequences. Earlier today, Chicago Fed President Charles Evans said that those who think "the risk of overshooting our inflation objective... exceeds the potential benefits of speeding improvement in labor market" are "extremely, and inappropriately, asymmetric in its weighting of the Fed's dual objectives to support maximum employment and price stability." One option for the Fed is keeping the interest rate near zero until unemployment drops "below 7.5% or even 7.0%, as long as medium-term inflation stayed below 3%," said Evans in his speech at the European Economics and Financial Center. -- Written by Chao Deng in New York.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV