Street Doesn't Expect Much from Bernanke & Co.


"Market expects FOMC to keep interest rates at basement levels. . ."

The market expects the Federal Open Market Committee (FOMC) to keep interest rates at their basement levels and not much else from Bernanke & Co. Wednesday as the central bank wraps up a two-day meeting.

JPMorgan economist Mike Feroli doesn't expect anything new from the Fed's afternoon statement, with the possible exception of its description of growth. "It may sound a little downbeat because of the global environment and somewhat tighter financing conditions," Feroli says.

Inflation is another watchword, the economist says, noting "[The FOMC] haven't changed [their language] since the fall of last year, but inflation's been moving lower since, and that will be an interesting part of the statement to watch."

Across the Atlantic, minutes from the latest Bank of England policy meeting released Wednesday indicated a division among its members on the inflation outlook and one dissenter against keeping the bank's benchmark interest rate at an all-time low.

Because the market is expecting very little from the Fed, any departure from that, particularly anything that hints at the likelihood the U.S. economy could fall back into recession, is likely to draw a reaction. The major indexes were leaning to the downside during midday trading Wednesday, as the Dow Jones industrial average slipped 0.2%, while the NASDAQ composite index slipped 0.3% and the S&P 500 decreased 0.4%.

The Fed's release comes after the Commerce Department reported on Wednesday that sales of new homes tumbled in May, falling 33% to the lowest level on record. On Tuesday, the National Association of Realtors said existing home sales dropped 2.2% in May. The declines are an indication that buyers left the market after the federal tax credit for first time and repeat buyers expired in April.

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