Historic day at the Fed

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The Federal Open Market Committee, or FOMC, meets April 26-27, and unlike the custom of 2:15 p.m. EDT announcements that carry nothing of significance, the Fed is going to mix things up a bit.

No, they’re not going to change interest rates or make any other decisions with a significant pocketbook effect — at least not yet. But the Fed announcement will come at 12:30 p.m. EDT followed by Federal Reserve Chairman Ben Bernanke front and center at 2:15 p.m. for a press briefing. This is the commencement of a routine that will occur four times annually, and three times in 2011 — April, June and November.

Bernanke’s press conference, coupled with the rapidly approaching end of the second round of quantitative easing, known as “QE2,” in June, mean the markets will be watching. But the altered format may be the only real nugget of news to come from the Fed. The $600 billion of Treasury purchases will sunset — as scheduled — at the end of June. There is no chance of the quantitative easing program being curtailed early, considering that first-quarter economic growth is expected to be soft. There’s also the ongoing concern about negative economic effects of higher oil prices.

While the FOMC has devoted more “don’t worry, everything is under control” talk to inflation, the reality is that inflation is not currently on the radar screen of Fed worries.

This is the point where we make the obligatory reference to the FOMC as a dozing air traffic controller, asleep on the job as inflation pressures are building much the way the Fed and other regulators slept — or ignored — the ballooning home prices and shoddy loan practices during the housing boom.

There is a contrasting strategy to look at when it comes to addressing budding inflation pressures. The central banks of China, Canada, the European community, and a host of emerging economies such as India and Brazil are already raising interest rates in an effort to keep inflation corralled.

The European Central Bank, or ECB — a slow-growth, developed economic behemoth like the U.S. — has hiked interest rates already and is clearly favoring price stability to the risk of the economic recovery. But the FOMC is favoring the economic recovery to the risk of price stability.

The Fed isn’t going to flip priorities now, and neither course — the Fed or the ECB — will be validated as the best right away. But the debate will continue, and so will the ultra-low interest rates.

For full coverage of the Fed’s press conference, tune in at 2:15 p.m. EDT, Wednesday, April 27, to our live chat.