This week Federal Reserve officials will meet in Washington to discuss monetary policy on Tuesday and Wednesday. Although the last meeting was fraught with apprehension about the possibility of the Fed “tapering” its monthly bond-buying program, this time around few believe that the meeting will result in the Fed scaling back.
In part, that is because of the dovish notes Chairman Ben Bernanke struck in his press conference on Sept. 19, but also because the government shutdown and debt-limit standoff caused enough economic disruption for the Fed to be wary about withdrawing monetary easing.
The upshot is that the majority of banks that trade with the Fed now expect the taper to come in March, defusing drama for this week's meeting. Any changes to the Fed's policy or outlook, while possible, would constitute a major surprise.
In other Fed news, Janet Yellen, President Obama's nominee to replace Bernanke when his term ends in January, will begin meeting with members of the Senate Banking Committee to discuss her confirmation process. In the first sign that Yellen's confirmation will not be a pushover, Sen. Rand Paul, R-Ky., threatened last week to place a hold on Yellen's candidacy until he got a vote on his bill to subject the Fed to a comprehensive audit. Paul is not a member of the Banking Committee, but could delay a vote on Yellen's nomination on the Senate floor. But because Yellen is the vice chairman of the Fed, if she is not confirmed by the time Bernanke leaves office, she would become the acting chair anyway.
This week members of the budget conference committee mandated by the debt ceiling deal, including Sen. Patty Murray, D-Wash., and Rep. Paul Ryan, R-Wisc., are meeting for the first time. Both sides have expressed skepticism that a "grand bargain" can be reached, but some are hopeful that smaller goals can be achieved despite the poor outcomes of fiscal negotiations over the past few years. Ryan, for example, has said that he hopes to trade the across-the-board budget cuts that took place under sequestration for more targeted spending cuts and small-scale entitlement reforms.
A clearer picture of inflation will emerge this week, as two government reports on prices delayed by the government shutdown will finally be issued. The Bureau of Labor Statistics will release the Producer Price Index Tuesday morning and the more widely watched Consumer Price Index Wednesday morning.
The Federal Reserve will release a report on industrial production Monday morning, and on Friday morning the Institute for Supply Management will publish its index of manufacturing activity, which is projected to have slowed following the fiscal standoff.
On Tuesday, the Census Bureau will issue the September retail sales report, also delayed by the government shutdown. Consumer spending is expected to have decreased since August.