Wall Street Awaits Fed Action on Interest Rates

L.A. Times Archives

Dec. 13, 2004 12 AM PT

From Associated Press

Wall Street will be looking to the Federal Reserve in the week ahead, hoping the nation’s monetary policymaker will issue a positive outlook on the economy and potentially give stocks a year-end boost.

The Fed’s Open Market Committee is widely expected to raise the nation’s benchmark interest rate by a quarter of a percentage point, to 2.25%. That kind of move usually assumes that the economy is healthy enough to withstand a higher rate -- although with the dollar still weak against foreign currencies and wholesale prices creeping higher, a rate hike could be deemed necessary even if the Fed sees weakness in the economy.

The dollar’s woes and higher prices could bring on inflation, and tightening the money supply through a rate hike would reassure investors that inflation won’t get out of hand.

As usual, Wall Street will closely read the Fed’s policy statement, since the rate rise itself is considered a done deal. The Fed is expected to retain its stand that a “measured pace” of increases is needed to forestall inflation.

Last week, investor uncertainty pressured stocks as Wall Street contended with volatile oil prices and a mix of economic data that left a muddled picture of the economy that many hope the Fed will clarify. For the week, the Dow fell 0.46%, the S&P; 500 dropped 0.27% and Nasdaq was down 0.93%.

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This Week’s Datebook

Today

* Commerce Department issues report on November retail sales and business inventories.

* Oracle Corp. issues quarterly earnings data.

Tuesday

* Federal Reserve meets to set short-term interest rates.

* United States, Israel and Egypt sign trade agreement in Cairo.

* Pier 1 Imports Inc. issues quarterly earnings.

* Government reports on October trade deficit.

Wednesday

* Securities and Exchange Commission meets to consider proposed revised rules governing stock exchanges.