Stock markets took a break from a recent upswing this week as policy makers at the U.S. Federal Reserve pondered and then failed to change policy at all.
A lack of action is often the Fed's way of saying, "don't panic," a message they have given often.
More often than not, the Fed sits on its hands, leaving the economy to do its sluggish thing for a while.
The Fed Tuesday said it would keep its historically low lending rates unchanged at zero to 0.25 percent, as was widely expected. Policymakers on the Open Market Committee also elected to continue turning proceeds from their securities investments into more securities purchases, a program initiated a month ago. That will keep their balance sheet dead even at more than $2 trillion. It also placates those who feel printing more money, which is what the Fed does when it goes on a shopping spree, would trigger a round of inflation that would sock struggling consumers.
The fear goes both ways these days. Rising consumer prices with the unemployment rate at 9.6 percent or anything higher than the target rate would put already destabilized families at further risk.
Deflation, which sounds like a joy at first, is even more of a buzz-kill as falling prices prompt consumers wait to make purchases and reduce profits, which leads to more layoffs.
Stuck between a rock and a hard place, "they can't say unequivocally that we're going into another recession, but they certainly can't promise a rapid recovery. They're in this limbo state," Rutgers University economist Michael Bordo told The New York Times.
The Fed painted a predictable portrait of the economy Tuesday, succinctly noting that "Household spending is increasing gradually, but remains constrained by high unemployment, modest income growth, lower housing wealth and tight credit".
Business spending was on the rise, the Fed said, but businesses that don't upgrade computers, trucks, planes and tractors eventually fall behind quickly in the modern age and last year spending was put on hold. The economy is, essentially, catching up, but it is catching up to 2009, not 2010. The metaphor that comes to mind is a race on an oval track. The economy might be catching up, but it has been lapped a few times and has a ways to go.
Also in Washington, the White House announced economic adviser Lawrence Summers was returning to Harvard University where The Wall Street Journal reported his tenure would be revoked if he did not report to work soon.
As potential replacements, the White House is considering Anne Mulcahy, former chief executive officer of Xerox Corp., in part to answer to concerns the Obama administration has too little input from corporate America. Deputy National Economic Council Director Diana Farrell, formerly of McKinsey & Co., and economist Laura Tyson of the University of California, Berkeley, are also being considered for the post, the Journal reported.
In international markets Wednesday, the Nikkei 225 index in Japan fell 0.37 percent, while the Shanghai composite index in China added 0.11 percent. The Hang Seng index in Hong Kong rose 0.21 percent, while the Sensex in India fell 0.3 percent.
In Australia, the S&P/ASX 200 gained 0.17 percent.
In midday trading in Europe, the FTSE 100 index in Britain dropped 0.45 percent, while the DAX 30 in Germany lost 0.99 percent. The CAC 40 in France shed 1.05 percent, while the pan-European DJ Stoxx 50 slipped 1.26 percent.
UPI
