The Federal Reserve is like a duck: calm on the surface but working furiously just out of plain sight.
The central bank needs to project composure in the week ahead, as undercurrents pick up. The Fed’s interest rate setting committee meets on Tuesday and Wednesday. There is no question the group will keep interest rates near zero. After all, it has pledged to do so “until it is confident that the economy has weathered recent events,” as it said in April.
Last month, the agency went further and said it would tolerate a burst of inflation without raising interest rates. This marked a change in the Fed’s long-standing plan to fight even the first hint of inflation over 2%.
These are measured but tectonic efforts out of sight for most in the economy. Yet they power the investor confidence that has helped fuel the stock market rebound from its pandemic panic.
This week’s Fed meeting is its last before Election Day. Even though the November meeting will be the two days after Election Day, there’s no guarantee we will know who the next president will be or which party will control the Senate. Political uncertainty is a bigger market and economic risk than partisanship. And it’s a risk the Fed can do nothing to address directly.
Meantime, hiring has slowed, economic stimulus programs have expired, consumer confidence is at a six-year low, and mortgage delinquencies have spiked. “We do think it will get harder from here,” Federal Reserve Chairman Jerome Powell told NPR in early September. He was referring specifically to reducing unemployment, but he might as well have been talking about the Fed’s efforts to keep paddling until the economy is sure-footed again.
ABOUT THE WRITER
Financial journalist Tom Hudson hosts “The Sunshine Economy” on WLRN-FM in Miami, where he is the vice president of news. He is the former co-anchor and managing editor of “Nightly Business Report” on public television. Follow him on Twitter @HudsonsView.
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