Federal Reserve policymakers are expected to hold a two-day meeting starting on Tuesday to determine U.S. interest rate policy. Sam Stovall, chief investment strategist at Standard & Poor’s, weighed in on how this week’s decisions will affect the economy.
“I don’t think the Fed is going to do anything,” Stovall told CNBC.
“They might soften their commentary to investors when they conclude their meeting on Wednesday."
"What they want to do is...make sure that the unemployment rate does not peak above 10 percent—which we think it will, and it will stay above 10 percent for all of 2010—and they don’t want to make the mistake like Japan and pull away the stimulus too quickly.”
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With unemployment rates nearing 10 percent, Stovall said inflation should not be a concern for the economy.
“Since wages are the biggest component of inflation, I think [unemployment] is going to keep a pretty good damper on things," he said. "Also, capacity utilization now at 68 percent, close to the record low, so it’s going to be a while before inflation becomes a major issue.”
Additionally, Stovall said he doesn’t see the Fed coming up with a successful exit strategy in the near-term.
“The questioning that Bernanke got from the government indicating that they’re going to be taking a look at the all actions more closely implies that there is increased political activities in whatever Fed decisions might be occurring,” he said.
“So there might be a lot of reluctance on the part of Congress to allow the Fed to start removing itself and therefore have negative repercussions on the general people on Main Street.”
No immediate information was available for Stovall or his firm.
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