Will the Fed Soften Its Assessment of the Economy?

Fed may soften some of its forecast factors for the U.S. economy

The U.S. Federal Reserve Open Market Committee begins a two-day policy meeting today, and there is speculation about what will come out of it. While no change is really expected in terms of policy or rates, there is some speculation that some aspects of the forecast could be softened.

While the Fed is expected to continue to claim that the economy is likely to experience moderate growth, some aspects of the economic forecast are likely to be softened. TheStreet reports on some of the likely changes to the economic outlook:

That said, investors should expect some changes in the Fed’s economic assessment. While the FOMC is still likely to anticipate moderate growth, it may tweak several factors lower, giving a softer cast to its overall assessment. For example, previously it said that “growth in household spending has picked up,” but now after two disappointing retail sales reports, the Fed may downgrade its assessment. Housing starts also appear weaker than the Fed previously noted. Financial markets are somewhat less supportive of the economy as well, with LIBOR having risen, and the equity market roughly 10% lower than when it met last time. Global factors are also not as supportive, given recent European developments.

The U.S. dollar is mixed this morning, higher against the euro in forex trading, but lower against the sterling.

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