By Richard Berner & David Greenlaw | New York
Recession over, but no change in policy. At their meeting this week, the Federal Open Market Committee (FOMC) likely will leave monetary policy unchanged, and will probably continue to indicate that "economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period." Fed Chairman Bernanke's view that the recession is probably over doesn't materially change the setting for Fed policy. In contrast with some reports that officials are contemplating changes, Fed officials in their public statements express a continued high degree of caution regarding the sustainability of the incipient US economic recovery. Officials think that sustained recovery is far from assured, that core inflation may still decline from current levels, and that it's still early days for the healing in the financial system and markets. As a result, apart from acknowledging that the economy and markets have improved since the August FOMC meeting, the general tone of the post-meeting statement probably will be similar to the one following the last meeting, and open discussion of exit strategies is still far off.
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