Having bet the farm on the largest government intervention in human history, the secretive Federal Reserve will meet on Tuesday in Washington, D.C. to assess the strength of its so-called “recovery” and set the nation’s fiscal policy for the immediate future.
It’s not a pretty picture …
Unemployment remains high, income levels are still low, oil prices are skyrocketing, consumer prices are beginning to creep up and the nation is spiraling deeper into debt with each passing day. In fact, the red ink for the month of February alone amounted to a record $222.5 billion.
Not only that, February marked the 29th consecutive month during which the U.S. government operated in the red – another record.
Despite these conditions, the Federal Reserve is expected to leave interest rates near zero and continue its ongoing purchase of $600 billion worth of U.S. Treasury bonds. The interest rate decision is tough to argue with considering the ripple effect that any contraction of credit might have on the economy, although there is expected to be vigorous debate over continuing the bond-buying.
At the Fed’s last meeting in January, forecasters were in a confident mood – projecting that the U.S. economy would grow by as much as 3.9 percent during 2011. Still, Keynesian-in-Chief Ben Bernanke sounded a less-than-optimistic note on employment – prompting many to fret that the fundamentals of the U.S. recovery were still far-from-sound.
Two months later, the Fed is faced with a much gloomier global market – one punctuated by the civil war in Libya, the increasing instability of the European economy and a devastating earthquake/ tsunami in Japan.
What will the Fed do?
That’s the problem … at this point there’s not much it can do. If America’s employment growth and consumer spending fail to keep up with coming price increases, America’s economy could be in a world of hurt all over again.