What the Fed Has to Consider at Tuesday's Meeting
Mon Sep 20, 2004
Financial markets and Wall Street analysts have heeded a barrage of optimistic commentary from senior Fed officials, who argue the recent "soft patch" in the economy has passed.
A recent Reuters poll of 22 top economists on Wall Street found they unanimously expected an increase in the federal funds rate at Tuesday's meeting, to 1.75 percent from 1.5 percent.
The Fed's language could be a bit more upbeat on the economy than in its August statement, they say, and bond market hopes that officials may hint at a pause in tightening are likely to be disappointed since the Fed likes to keep its options open.
Central bankers want official rates to get closer to a "neutral" range that neither stimulates nor slows growth.
The Federal Open Market Committee, which sets monetary policy, will issue a statement after its meeting, at around 2:15 p.m. on Tuesday.
Here are a few of the factors the Fed will consider:
LUKEWARM JOBS GROWTH
TOO LOW FOR COMFORT
Numerous Fed officials in recent weeks have delivered a similar message: that the 1.5 percent federal funds rate is too low for a growing economy, despite recent mixed economic news, and needs to be restored to a more normal level. Gramlich called the current funds rate "inordinately low."
In testimony on Sept. 8, Fed Chairman Alan Greenspan said data suggested the economy has "regained some traction."
On Sept. 9, Janet Yellen, the San Francisco Fed president, said the hurdle for data is "reasonably high" for the Fed to pause in raising rates because the fed funds rate is so low.
DANCING TO A DIFFERENT TUNE
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