Federal Reserve says economy is “leveling out”

Flickr.com/David C. Pearson


The stock market is making gains. Housing sales are showing signs of life. And the Federal Open Market Committee is tweaking its rhetoric, saying “economic activity is leveling out” in a statement Wednesday.

Cautioning that the economy is likely to stay weak for some time, the FOMC kept the federal funds rate unchanged at 0 to 1/4 percent.

There are a lot of so-called “talking heads” speculating on the economy’s recovery, but there’s a reason why so much attention is given to the pen of the Federal Reserve’s policy-making body, the FOMC. Notice the subtle revisions compared to the last statement on June 24:

June 24: “Conditions in financial markets have generally improved in recent months.”

Today: Conditions in financial markets have improved further in recent weeks.”

Verdict: Conditions of financial markets are looking better in recent weeks versus months.

June 24: Household spending has shown further signs of stabilizing but remains constrained by ongoing job losses, lower housing wealth and tight credit.”

Today: Household spending has continued to show signs of stabilizing but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit.”

Verdict: Things are still looking the same on Main Street. Income growth is an added concern.

But the sentences below could have been cut-and-pasted from June 24th’s statement. The following appeared again virtually word for word:

“The prices of energy and other commodities have risen of late.”

“Businesses are cutting back on fixed investment and staffing but appear to be making progress in bring inventory stocks into better alignment with sales.”

“Although economic activity is likely to remain weak for a time, the Committee continues to anticipate that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will contribute to a gradual resumption of sustainable economic growth in a context of price stability.”

Verdict: Americans are hoping the FOMC’s next statement can find some literary style, and hence, a significant turn for the better.

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