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Week ahead: Fed in the hot seat

The Federal Reserve is on the hotseat this week, and new data scheduled for release should shed light on the state of the housing market.

Tuesday

Federal Reserve policymakers are slated to meet to decide the course of monetary policy, and are sure to have an extensive discussion. But an actual change in policy is probably not likely.

The officials will weigh how much their outlook for the economy has deteriorated since they last met Aug. 10, and what, if anything, they should do about that situation. With the Fed's primary policy tool, its short-term interest rate target, already near zero, the central bank will need to take some new unconventional steps if its decides to act, the most likely option being to buy hundreds of billions of dollars worth of long-term Treasury bonds.

The problem is that because such a tool hasn't been used much, it's hard to know exactly what effect it would have; it might do little to boost the economy while causing problems down the road for the Fed. With a complex decision to make, look for the central bank to punt on the issue until the Nov. 2-3 meeting, and following this week's meeting only tweak their statement to reflect the evolving sentiment in the room.

Also Tuesday, forecasters expect new data to show an 0.7 percent rise in housing starts for August.

More: Wednesday-Friday

Thursday

Existing home sales are forecast to have risen in August as well, with a 7.1 percent bump, a partial rebound following a 27 percent fall in July.

Friday

New home sales are similarly expected to rebound, with a 6.9 percent August increase forecast, following a 12.4 percent tumble in July.

Meanwhile, analysts expect durable goods orders to have fallen 1 percent in August. But orders for non-defense capital goods excluding aircraft, a useful proxy for business investment, is expected to rebound 4 percent following an 8 percent drop in July.

Also Friday, Fed Chairman Ben S. Bernanke plans to speak at Princeton University, his former employer, on "Implications of the Financial Crisis for Economics."

By Neil Irwin  | September 20, 2010; 6:00 AM ET
Categories:  *Economic agenda  
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