Keeping an eye on the Fed’s moves

Marketplace Staff Mar 16, 2010
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Keeping an eye on the Fed’s moves

Marketplace Staff Mar 16, 2010
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TEXT OF INTERVIEW

Steve Choitakis: Today, the Federal Reserve Board meets to take a closer look at the economy and make some decisions about monetary policy. Investors are keeping tabs because they think there could be a little foreshadowing of future moves, such as when stimulus measures will wind down or when interest rates will go up. Marketplace’s John Dimsdale joins us from our Washington studio with the latest. Good morning, John.

John Dimsdale: Good morning, Steve.

Chiotakis: So what are some of the things these Fed watchers are looking out for?

Dimsdale: You know, they pour over these statements that the Fed includes with its interest rate announcements almost word for word for clues. For a while now, the Fed’s been telegraphing that their interest rates are going to stay essentially at zero for “an extended period.” That’s generally thought to mean six months or so. The first sign that the Fed thinks the economy is generating its own momentum and doesn’t need the stimulus of low interest rates is likely to be when they take that phrase “extended period” out of the statement.

Chiotakis: And could that be today, John?

Dimsdale: Well, in the speeches that Fed members have been giving recently, they still talk about how fragile the recovery is. That means that the majority of the panel is probably not ready to change the signal. But there is a growing sense among Fed watchers that the next meeting, the end of April, just might be the time when the group takes the phrase out of the statement — telling the markets that the economy is strengthening and it’s time for higher rates

Chiotakis: And what does the Fed look for as far as signals of economic strength?

Dimsdale: Well job creation would be the prime indicator of a recovery. They also watch factory output and bank lending. Inflation is the real thing to fear. So far there’s no sign that retailers and wholesalers are able to raise their prices and that’s giving the Fed some room to keep interest rates low, at least for the time being.

Chiotakis: Marketplace Washington bureau chief John Dimsdale reporting this morning from D.C. John, thanks.

Dimsdale: You’re welcome.

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