Fed minutes could shed light on rate hike thoughts
Federal Reserve Chair Janet Yellen signaled this past week that the central bank will be reluctant to raise interest rates next month if global economic troubles and the punishing slide in markets don’t let up.
Minutes of the Fed’s meeting in January should provide a clearer snapshot of policymakers’ thinking. This week’s economic news also features reports on industrial production and inflation.
Housing has been an economic pillar. Housing starts have been supported by solid job and income growth, low mortgage rates and skimpy home supplies, Nomura economist Lewis Alexander says. Construction, he says, also got a bump late last year from unseasonably high temperatures, but the weather turned colder and snowier in January. As a result, economists surveyed by Action Economics expect the Commerce Department on Wednesday to report that housing starts rose a modest 1.6% last month to a seasonally adjusted annual rate of 1.17 million.
Industrial production, by contrast, has been hindered by the plunge in oil-sector investment, weak overseas demand and the rising dollar. A measure of manufacturing activity has shown contraction four straight months, and factory output probably remained sluggish in January, Alexander says. PNC Financial Services Group says the colder weather lifted heating demand and utility output. Economists figure the Fed will record a 0.3% gain in industrial production.
The Fed sent a mixed message in a statement after its meeting Jan. 26-27. It removed its upbeat view of the risks to its outlook as “balanced” and said it was monitoring the overseas and market strains and “assessing their implications.” Yet policymakers emphasized the fourth quarter’s strong job growth over the weak rise in GDP and reiterated plans to raise the benchmark interest rate gradually after boosting it in December for the first time in nine years. Meeting minutes could spell out what Fed officials need to see to raise rates at a meeting March 15-16, a move markets deem unlikely.
One thing policymakers would like to see before acting is a pickup in weak inflation. Consumer prices fell in December on cheap gasoline, but a core measure that strips out food and energy and that the Fed watches more closely edged up. Economists reckon the Labor Department will report Friday that a similar dynamic played out in January.