Ben Bernanke will have a tough time matching his dramatic December vow to keep interest rates ultra-low and easy money flowing until the U.S. cleans up its jobless mess.
Wednesday's conclusion to the U.S. Federal Reserve's first monetary policy meeting of 2013 is likely to be much less dramatic.
No change is expected to the Fed's commitment to keep rates low indefinitely by hoarding billions worth of bonds and mortgage-backed securities – so-called quantitative easing.
That's because the economic recovery remains uneven, inflation is in check and the jobless rate – at 7.8 per cent – remains well above the 6.5 per cent target set by Mr. Bernanke, the Fed chairman.
There's also no Fed press conference scheduled, and no new economic forecasts to release.
That doesn't mean Wednesday's statement will be a total yawn.
The last paragraph – indicating who voted and how – could prove to be the most telling. Four new regional federal presidents rotate on to the federal open market committee (FOMC) this year. The most notable departure is Richmond Fed President Jeffrey Lacker, an outspoken inflation hawk who has vigorously opposed Mr. Bernanke's embrace of QE from the start.
The Fed is poised to shift over the next few months from ramping up its bond purchases – now running at $85-billion (U.S.) a month – to eventually winding them down. The debate around the committee table will turn to exit timing, at this and future meetings.
The betting is that an exit won't come until next year at the earliest. Based on the Fed's own projections, the unemployment rate won't fall to 6.5 per cent until 2015.
One of the four newcomers – Kansas Fed President Esther George – has expressed concerns about the fallout from all the bond-buying. But she's not nearly as doctrinaire as Mr. Lacker. And her views will likely be offset by Boston Fed President Eric Rosengren, a big QE fan, who also joins the FOMC this year.
This conundrum for the Fed is that the economic signals remain mixed. Economists estimate that the U.S. economy grew at an annual rate of 1.2 per cent in the fourth quarter. Consumers are still tentative, probably a reflection of the higher payroll taxes that kicked in this month (the U.S. Conference Board's consumer confidence index fell for the third month in a row in January).
On the other hand, the housing market has clearly turned the corner and a manufacturing renaissance is underway.
The danger for the Fed is that today's slow growth turns into a boom, and its foot is still firmly on the QE pedal.