The Federal Reserve will meet on Tuesday to discuss whether or not there needs to be a shift in monetary policy. It is not expected that the Fed will make any easing changes but could hint to the possibility to further easing in the future.
Lately, there have been solid economic reports. The employment report last week was good, although it may turn out to not be as good as we thought, and on Tuesday we found out that retail sales rose 1.1% in February. This is yet another sign that the American consumer is still reviving but getting stronger and stronger. The 1.1% gain was the largest gain in five months. However, the Fed is still concerned with the 8.3% unemployment. Despite the good payroll numbers the unemployment rate is having a hard time falling, which could mean that the Fed could be intervening in the future if it doesn’t change.
The Fed will also continue its warning on rising energy prices and its ability to derail an economic recovery. Other than that, it will mostly be an announcement that things are getting better but unemployment and higher oil prices are a threat that could slow the economy again.
Last time the Fed met in January, there was a lot more concern with the economy. Although they did not say they would continue with the Quantative Easing program, they did say that they will not raise rates until the latter half of 2014. Since then we have seen a broad spectrum of positive economic reports.
The Fed has been often criticized for its lack of intervention in 2008 when things really started to get bad and they are also criticized for intervening too much with programs such as QE. Unfortunately, we can not tell what would have happened if Bernanke was much more aggressive at the beginning of 2008. Some speculate that Lehman Brothers may have survived, along with unemployment not getting to as bad of a level that we saw.
Although the Federal Reserve is often criticized it is important remember that things would have been a lot worse if the Fed hadn’t intervened at all. It is easy to point the finger and place the blame on someone but hindsight is always 20/20. You have to believe that Bernanke and the rest of the Fed would have had a more rigorous easing strategy if they knew what 2008 was going to turn out to be like.