Fed to Meet on Rates; GDP Report Is Expected

Investors seeking signs of a broad recovery will focus this week on a meeting of the Federal Reserve and a slew of U.S. economic data.

U.S. durable-goods data on Tuesday will raise the curtain for Thursday’s report of U.S. third-quarter gross domestic product, expected to show a 6.5% growth rate, analysts said.

Whether the Fed sees signs of a sustained recovery in these figures will show when the Federal Open Market Committee meets Tuesday to discuss interest rate policy.

“If the U.S. data comes in line with expectations, it is likely to boost market sentiment toward the strength of the U.S. recovery,” said Lena Komileva, economist at Prebon Marshall Yamane. “But I don’t think economic improvement has been sufficient to justify a shift in the Fed’s bias.”

Since June, the central bank has said the risks to economic growth are roughly balanced.

“The economy has been through three years of a slowdown, during which a lot of slack accumulated, so for a sustained recovery we need to see a couple of years of growth remaining at 4% or so,” Komileva said.

The Fed was expected to keep its key rate steady at 1%.

U.S. data in the next week includes consumer confidence and housing numbers, but analysts said GDP and durable goods data would fall under the market spotlight.

Economists believe the U.S. economy grew at break-neck speed between July and September, with some estimates falling just short of 7%, a rate of expansion not seen since the height of the late-1990s boom.

Durable goods orders, which reflect consumer demand, were seen picking up in September after falling 1.1% in August.

“We are looking for a 1% month-on-month gain,” Paul Robson at Bank One Capital Markets said. He added that Monday’s homes sales data from the U.S. would also show how consumer sentiment was holding up.