What will the Fed say today?
Tuesday March 16, 2010
Posted 8 a.m. Eastern
The Federal Open Market Committee meets today, a meeting that occurs as consumers are gradually starting to spend again and the economy continues to improve. Although an interest rate hike is the last lever the Fed wants to pull, is this the meeting in which the "exceptionally low levels ... for an extended period" language starts to get tweaked?
The Fed also appears committed to halting mortgage purchases, with the days of both record low mortgage rates and nearly zero mortgage rate volatility are numbered.
A cautious tone and pace from the Fed is to be expected, considering all the uncertainty about the sustainability of consumer spending and economic growth. The lingering question is, where is the economic growth going to come from? We need the growth to create the jobs that spurs the spending. Right now, everything is leaning against the pillar of government support. Without it, consumer spending and economic improvement are nothing more than two drunks propping each other up in an alley. The path of the housing market is susceptible to any substantive rise in mortgage rates, likely expiration of the homebuyer tax credit, and the ever-expanding inventory of foreclosed homes.
The Fed is in no hurry to raise interest rates, as we know, and it may not even want to hint at it by tweaking the language of its statement. Don't be surprised if it punts to the next meeting at the end of April, buying more time to evaluate mortgage rates and the job market.
Read more Fed blogs.