Fed Likely To Offer Few Clues On Rate Policies
By MARTIN CRUTSINGER
WASHINGTON (AP) â¿¿ Chairman Ben Bernanke rattled markets last month when he said the Federal Reserve might slow its bond purchases later this year if the economy strengthens.
Economists expect the Fed will take a different approach Wednesday when it concludes its two-day policy meeting: Most expect policymakers will offer no major signals on interest-rate policies while stressing that any future changes hinge on the economy's health, not a set timetable.
"I would be surprised if they did anything to change policy at this meeting," said David Wyss, a former Fed staff economist and now an economics professor at Brown University. "I don't see anything to be gained by announcing something now rather than waiting to see how the economy performs."Financial markets have been pivoting for months on speculation that the Fed will or won't soon slow its $85-billion-a-month in Treasury and mortgage bond purchases. Those purchases have led more consumers and businesses to borrow, fueled a stock rally and supported an economy slowed by tax increases and federal spending cuts. The Fed might choose to clarify a separate issue: When it may raise its key short-term rate. The Fed has kept that rate near zero since 2008. It's said it plans to keep it there at least as long as unemployment remains above 6.5 percent and the inflation outlook below 2.5 percent. Unemployment is now 7.6 percent; the inflation rate is roughly 1 percent. Bernanke has stressed that the Fed could decide to keep its short-term rate ultra-low even after unemployment reaches 6.5 percent. Testifying to Congress this month, Bernanke noted that a key reason unemployment has declined is that many Americans have stopped looking for jobs. When people stop looking for work, they're no longer counted as unemployed. If that trend continues, Bernanke said that lower unemployment could mask a still-weak job market and that the Fed might feel short-term rates should stay at record lows.
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