How Will the Fed Handle a Mildly Positive Economic Outlook?
A stream of modestly positive economic reports over the past few weeks means the Federal Reserve probably won’t take any further action to stimulate the economy at its key interest rate-setting meeting on Tuesday. Last week’s mildly optimistic data included a drop in initial claims for unemployment compensation to 450,000 in the second week of September from a revised 453,000 the week before, the fewest filings since July. The number of workers collecting jobless benefits under state programs also fell by 84,000. The government also reported that U.S. producer prices rose 0.4% in August, up slightly from analysts’ consensus estimate of 0.3%. Rising prices aren’t often a good sign for consumers, but lately, the Fed has been concerned that the country would fall into a deflationary spiral, in which prices fall and people postpone purchases because they expect prices to decline further, leading to lower demand, production cuts and layoffs, all of which feed back into the downward economic
