One has to wonder how members of the Federal Reserve policy committee filled the hours of their Aug. 22 meeting. Or perhaps they started a pool to bet on the winner of Survivor . They certainly didn't need much time to debate the problems the economy is facing right now.
Immediate woes are as rare as appetizing recipes for rat.
That's why the Fed's decision to hold short-term interest rates steady for the second meeting in a row came as no surprise to the financial markets. As for the future, the Fed did as expected and reiterated its position that the risks remain weighted toward inflationary pressures. The Fed likely feels that it must leave the fear of a future rate hike on the table, so that Wall Street exuberance doesn't add excessively to demand growth. Even so, an October move seems unlikely as well, unless the economic data, especially on the job front, take a radical turn toward strength. That's keeping a damper on unit labor costs, despite extremely tight labor markets.