Federal Reserve Set to Stay Course in Policy Meet

Washington: The Federal Reserve on Tuesday begins its first monetary policy meeting of the year to take the pulse of the US economy as it mulls an interest rate hike. The Federal Open Market Committee, the central bank's policy arm, is widely expected to signal no significant policy changes after it wraps up the meeting on Wednesday. But the FOMC post-meeting statement will be pored over for clues to the US central bank's thinking on the timing for the first interest rate hike since 2006. The Fed has kept its key federal funds rate pegged between zero and 0.25 per cent since late 2008 to support the economy's recovery from the deep 2008-2009 recession. In October, the Fed ended its massive asset-purchase program, or quantitative easing, and has signaled that a rate hike would be coming this year. Most analysts expect the increase will arrive by June. Since the December FOMC meeting, the rapid slide in oil prices has pulled weak inflation even lower, corporate earnings season has gotten off to a bumpy start, and the ailing Eurozone was dealt a blow by Sunday's resounding victory of a leftist, anti-austerity party in Greece. The European Central Bank's announcement last week of full-scale QE to stimulate growth and avert deflation in the 19-nation Eurozone, was expected to at least help the huge US trade partner in the short term. After months of mostly positive data - in December, the US unemployment rate fell to 5.6 per cent and consumer confidence rebounded - some weak spots have emerged. Job growth slowed but remained solid; wages sagged, barely keeping up with inflation; and retail sales plunged broadly in a critical month for stores in the holiday shopping season. Data released Tuesday sent mixed signals on the health of the US economy. Consumer confidence, an indicator of how willing consumers are to opening their wallets, soared in January to its highest level since 2007, according to the Conference Board. In the housing sector, the Commerce Department reported new-home sales picked up sharply in December from November, and were up 8.8 per cent from a year ago. The underlying trend in the housing market, however, pointed to a continued slowdown in price gains. The Case-Shiller 20-city price index rose 4.3 per cent year-over-year in November, compared to 4.5 per cent in October. A steep, broad fall in new orders for long-lasting manufactured goods in December signaled weakness. Durable goods orders fell 3.4 per cent, and November's revised decline was more than double the prior estimate. The FOMC meeting "will provide another chance for the Fed to assess the impact of the higher dollar and lower oil prices on the policy outlook"," Barclays said in a research note, adding, "We don't anticipate major changes to the statement."

Federal Reserve Set to Stay Course in Policy Meet

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