Fed Likely To Keep The Pedal to the Metal
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The Federal Reserve is expected to keep interest rates at record lows this week as officials gather in Washington on Tuesday and Wednesday to discuss interest rates and other issues pertaining to the fragile economy.
The big question that will be coming from these meetings will be if the Fed and Chairman Ben Bernanke will give any indication of when the rates will begin to rise and when the support given to the economy will begin to dwindle.
The complication for the Fed is if the stimulus packages are removed too soon it could pull the plug on what has already been an unstable recovery. However if the stimulus remains in play for too long then a new set of asset bubbles could emerge driven by inflation.
Bernanke has made it his point to place emphasis on sustaining stability in the recovery as he seeks a second term as Fed Chairman. He did make it clear last week that he and the Fed are in no hurry to rock the boat by raising rates.
Some are calling for rates to rise as promising economic data rolls in. Lately the unemployment rate dipped to 10 percent in November, from 10.2 percent in October, and the job cuts have slowed with the best number since the start of the recession last month of just 11,000 jobs lost.
Bernanke has persisted that the Fed expects that companies will not begin hiring new employees until the recovery becomes more stable. This forecasted sentiment by companies will keep the unemployment rate high.
Growth in the economy was finally seen in the third quarter, following four consecutive quarters of losing ground, but the worries still remain that the growth will falter if government support is taken away.
The interest rates will stay at zero to 0.25 percent where they have been since last December as Bernanke see "formidable headwinds" against the future of the recovery.
The big question that will be coming from these meetings will be if the Fed and Chairman Ben Bernanke will give any indication of when the rates will begin to rise and when the support given to the economy will begin to dwindle.
The complication for the Fed is if the stimulus packages are removed too soon it could pull the plug on what has already been an unstable recovery. However if the stimulus remains in play for too long then a new set of asset bubbles could emerge driven by inflation.
Bernanke has made it his point to place emphasis on sustaining stability in the recovery as he seeks a second term as Fed Chairman. He did make it clear last week that he and the Fed are in no hurry to rock the boat by raising rates.
Some are calling for rates to rise as promising economic data rolls in. Lately the unemployment rate dipped to 10 percent in November, from 10.2 percent in October, and the job cuts have slowed with the best number since the start of the recession last month of just 11,000 jobs lost.
Bernanke has persisted that the Fed expects that companies will not begin hiring new employees until the recovery becomes more stable. This forecasted sentiment by companies will keep the unemployment rate high.
Growth in the economy was finally seen in the third quarter, following four consecutive quarters of losing ground, but the worries still remain that the growth will falter if government support is taken away.
The interest rates will stay at zero to 0.25 percent where they have been since last December as Bernanke see "formidable headwinds" against the future of the recovery.
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