Tags: fed | meeting | policy | bernanke

Fed Expected to Maintain Policy as Bernanke Vote Looms

Tuesday, 26 Jan 2010 03:42 PM

The Federal Reserve on Tuesday started a two-day meeting that was expected to yield few policy shifts, and was taking place in the shadow of fierce Senate debate over Ben Bernanke's second term as chairman.

Fed officials say they are focused on developing an exit strategy from an unprecedented dose of monetary stimulus the central bank delivered to counter the worst financial crisis since the Great Depression.

Nonetheless, the central bank will almost certainly reiterate its commitment to keeping interest rates at rock bottom lows for an "extended period," particularly given jittery financial markets and a spotty economic recovery.

Weak holiday retail sales and further setbacks in housing should dampen talk of any immediate rush for the doors.

Instead, policymakers will continue to debate the merit of various tools that might be used to drain credit from the banking system.

The Fed gathers amid a firestorm in Washington over Ben Bernanke's nomination to a second term as Fed chairman.

Once expected to sail through the Senate, his confirmation vote ran into some resistance last week by key Democrats, sending Wall Street, which strongly backs the chairman, sharply lower.

While rates will stay effectively at zero for some time, analysts will be looking to see whether there is any sign that the more hawkish members of the central bank are gaining ground within the Federal Open Market Committee.

"The FOMC statement on Wednesday and the subsequent minutes will be closely watched for evidence of growing divergence of views between the hawks and the doves on the Committee amid mounting perceptions in the market that inflationary risks are on the rise and the Fed is moving closer toward tightening policy," said Lena Komileva, G7 economist at Tullett Prebon.

Investors are also curious about whether the Fed will soon raise the discount rate it charges banks for emergency loans, and will hunt the statement for clues to that effect.

Financial markets, which took a drubbing last week, have since stabilized as Bernanke's confirmation began looking more certain.

The latest Reuters tally showed 42 out of 100 senators were likely to vote for Bernanke, while 18 vowed to vote against and the rest remain undecided.

The vote is expected as early as Thursday.

Bernanke's term officially expires on Jan. 31, at which point Vice Chairman Donald Kohn would likely take over if the vote had not yet gone through.

© 2017 Thomson/Reuters. All rights reserved.

   
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The Federal Reserve on Tuesday started a two-day meeting that was expected to yield few policy shifts, and was taking place in the shadow of fierce Senate debate over Ben Bernanke's second term as chairman. Fed officials say they are focused on developing an exit strategy...
fed,meeting,policy,bernanke
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2010-42-26
Tuesday, 26 Jan 2010 03:42 PM
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