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Fed on hold, economy activity questionable

By Evelina M. Tainer, Chief Economist, Econoday
August 16, 2002




The FOMC voted on Aug. 13 to leave the federal funds rate target unchanged at 1.75 percent, but they shifted their bias towards easing due to heightened uncertainty surrounding the pace of economic activity. The action was no surprise. As the week progressed market players were ready to focus on economic news. Indicators were mixed on all fronts: retail sales, industrial production, housing, consumer sentiment. Inflation remained subdued. While a handful of economists made headlines this month with predictions of an imminent Fed rate cut, the bulk of the profession maintained that the Fed would leave rates unchanged this year. Some are beginning to change their tune given the most recent data. In any case, sentiment remains mixed.

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