News Column

As Fed Twists, US Waits for Music to Stop

Dec. 7, 2012

(c)2012 The Miami Herald Distributed by MCT Information Services

The music is ending at the Federal Reserve but the central bank will continue dancing around in hopes the economy picks up its tempo. It has been more than a year since the Fed began what is called Operation Twist. (Yes, it's named after the Chubby Checker song.) The idea behind the monetary twist is to lower long-term interest rates with the goal of spurring people and companies to borrow and spend money.

It has worked -- kind of. If you can qualify for a loan, interest rates are low. Consumers are back spending money on cars and houses. Companies, though, remain misers. The Fed is scheduled to end the operation at the end of the year.

On Tuesday and Wednesday in the week ahead, Federal Reserve policymakers will meet. They will debate the effectiveness of their twisting. They will discuss what could happen if the music stops or slows down. They will decide if they want to change their tune from mild concern about the economy to one of outright worry.

Unfortunately for the central bank, consumers, business and the federal government are not in tune with one another. The government is gridlocked, and businesses are fearful even though consumer confidence is running high. That economic dissonance makes striking the right chord tough for the Federal Reserve.

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ABOUT THE WRITER

Tom Hudson is anchor and managing editor of "Nightly Business Report," produced by NBR Worldwide and distributed nationally by American Public Television. Follow him on Twitter @HudsonNBR.



Source: Copyright The Miami Herald 2012


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