If
Federal Reserve Board officials meet on Dec. 21 and nobody’s around to listen, do they make any noise?

Probably not, say market watchers. Most don’t expect members of the policy-setting Federal Open Market Committee to change rates at their final gathering of 1999. That’s because the Fed has put extra money into circulation and taken other extraordinary steps to ease people’s tensions about the Y2K date change, and a rate increase could negate those measures, as well as cause the markets to come unglued.

Still, there may be a shift in the so-called “bias” that Fed members set at the end of every meeting. The bias, which is disclosed in the announcement released by the Fed after each meeting, indicates whether board members are inclined toward dropping rates, taking no action or raising rates at their next gathering. On
Nov. 16, when the FOMC last met, officials downshifted to a neutral stance. Now, some think they’ll announce a tilt back toward higher rates.

At the same time, there is some confusion over what exactly the bias means — a problem Fed officials have grumbled about in recent weeks. Some market observers have interpreted a hiking bias to mean that rates will definitely move up at the next meeting, and board members say that’s not necessarily the case. As a result, the Fed may announce changes in the way it conveys the bias, or clarify the bias’ meaning, next week.

Interest rate watchers should keep track of how the Fed resolves the issue, but not worry too much about the outcome of the meeting with regard to rates. The Federal Funds Rate will likely stay at 5.5 percent.

On the other hand, consumers should read the Fed’s post-meeting statement closely because it could provide evidence of what the future holds for rates. The economy hasn’t really slowed despite the Fed’s three 1999 rate hikes, and board members may very well say they’re ready to raise rates again next year to guard against inflation. If they do, there’s a good chance borrowing will get even more expensive in the new year.

The next Fed meeting is a two-day one scheduled for Feb. 1 and 2. Consumers can find the rest of the 2000 dates at the Fed’s
Web site.