The Federal Open Market Committee (FOMC) is meeting on Tuesday, August 13. They will be weighing not only the indicators that have been reported this past week (showing friendly inflation news and pretty decent productivity growth) but also the combination of employment, GDP and other production and sales figures reported since the last FOMC meeting at the end of June.

Bond investors and some economists have come to the conclusion that the Fed will reduce the federal funds rate target before the year is out. Early in the week many market players were convinced that the Fed would actually cut the federal funds rate this Tuesday. (In fact, one bold Wall Street firm is predicting a 50 basis point rate reduction.) By the end of the week, though, consensus formed for only a change in the bias, from neutral toward economic weakness. Few Federal Reserve officials have been on the dais in the past couple of weeks (likely due to the blackout period in advance of the meeting), but those that have spoken on the record (Robert Parry, William Poole and incoming Governor Ben Bernanke) have indicated that monetary policy is stimulative and economic conditions moderate and not necessarily indicative of a double-dip recession.

The economic picture is not robust these days, but conditions are consistent with a moderate recovery following a relatively mild recession.