This Week Aug. 10-14
All Eyes Turn To Meeting of Fed Committee
July retail sales data is expected to show a rise due in part to the "Cash for Clunkers" program.
(Mark Lennihan - AP)
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No August vacation for economy-watchers yet, as another big week is on the way.
The main event is a meeting of the Federal Reserve's policymaking committee on Tuesday and Wednesday. It's a forgone conclusion that the central bank will leave its main target lending rate near zero and continue signaling that the number is likely to remain there for some time.
The interesting question will be what, if anything, the Fed chooses to do with its more unconventional programs. A program to buy $300 billion worth of U.S. Treasury bonds is set to run out in September if the Fed does not expand it; the program is meant to lower long-term interest rates and improve lending conditions more generally.
There is a good chance the Fed will let the program expire. For one thing, the economy is looking better, removing some of the urgency for extraordinary measures. For another, opinions are mixed within the Fed on whether the program has been successful at achieving its goals, which could make it hard to get strong consensus around further purchases. And finally, the program has caused fears in some precincts that the Fed will continue buying Treasury securities, essentially printing money to fund the nation's budget deficits.
Markets will also be looking for guidance on the policymakers' view on other nontraditional Fed programs, including its purchases of mortgage-backed securities and debt from Fannie Mae and Freddie Mac, and a program to prop up consumer and business lending known as the Term Asset-Backed Securities Loan Facility, or TALF.
On Thursday, the Commerce Department releases July retail sales data, which is expected to show a 0.7 percent rise in sales, reflecting largely the boost in auto sales due to the "Cash for Clunkers" program.
Friday, the Fed releases industrial production data for July, which is likely to show a 0.4 percent uptick in output from the nation's factories, consistent with the recovery in the economy that analysts now expect in the second half of the year. Also Friday, the consumer price index is expected to show no change in July.
-- Neil Irwin
NEIL'S MUST-READS: In the Economist, University of Chicago economist Robert Lucas defends the economics profession, and Berkeley economist Brad Delong uses his online journal "Grasping Reality with Both Hands" to attack Lucas in characteristically biting manner.
