Here's What To Watch For Wednesday From The Fed
The Fed could stress anew that 6.5 percent unemployment is merely a threshold, not a trigger, for any rate increase. Which means it might choose to keep the benchmark rate at a record low for an extended period even after unemployment has dipped below 6.5 percent.
That's especially true if unemployment is dropping mainly because more people have stopped looking for work, rather than because employers are hiring lots of people. The government doesn't count people as unemployed once they stop looking for a job.
This is one of four meetings each year when the Fed updates its economic outlook, based on individual forecasts of board members and regional bank presidents. It's likely to downgrade its outlook as it takes account of reality: The U.S. economy hasn't grown as fast this year as the Fed had expected.In their previous forecast three months ago, Fed officials predicted that the economy would grow between 2.3 percent and 2.6 this year and between 3 percent and 3.5 percent next year. Most economists think the economy will have grown 2 percent â¿¿ at best â¿¿ this year and roughly 2.6 percent next year. The Fed will update its forecasts for unemployment and inflation, too. Besides updating its outlook for 2013, 2014 and 2015, the Fed will offer its first economic predictions for 2016. These numbers will be watched for any hint that the Fed has grown more or less optimistic. More optimism could mean the Fed feels the economy could handle future rate increases relatively soon. Less optimism could signal that any rate increases remain further off. â¿¿ BERNANKE NEWS CONFERENCE This will be a major event â¿¿ and not just because it will likely follow the Fed's announcement of a pullback in bond buying. It's also Bernanke's next-to-last news conference as chairman before his term ends Jan. 31. (His final news conference will follow the Fed's last meeting of the year in mid-December.) Early this week, Lawrence Summers withdrew from consideration for the chairman's job, leaving the Fed's vice chair, Janet Yellen, as the leading candidate. Obama could announce his choice later this month.
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