Much Debate But Little Drama Expected at Fed

When Federal Reserve policymakers meet this week, there is likely to be plenty of spirited debate behind closed doors. But the announcement of its result Wednesday afternoon is poised to be a snoozer, by conventional measures.

The Fed is almost certain to leave the federal funds rate, which it controls, near zero. The Federal Open Market Committee will probably also leave language in its statement that the weak economy is likely to "warrant exceptionally low levels of the federal funds rate for an extended period," though a tweak is not out of the question.

The big question around the table is likely to be a straightforward one: How strong, and how lasting, will the incipient recovery turn out to be? Some Federal Open Market Committee members, in recent public appearances, have hinted that they think the economy will soon be strong enough that the Fed can begin pulling away its support. Many in this wing also fear that the sheer volume of money that the Fed has created risks an outburst of inflation in the not-too-distant future, and so they want to wind it down as soon as possible.

The consensus of the committee, though, appears to be that the recovery is sufficiently fragile, and the risk of inflation sufficiently remote, that the central bank needs to keep doing (almost) all it can to support the economy. And the panel members see there being so much slack in the economy, given the 9.7 percent unemployment rate, that there is unlikely to be an inflation problem anytime soon.

Here are the questions Fed-watchers will be looking for answers to in Wednesday's statement: How much will the FOMC upgrade its assessment of the economy compared with its August meeting? Will policymakers give a more solid indication that a program to buy up to $1.25 trillion in mortgage backed securities will be allowed to expire in the months ahead? And will Jeffrey Lacker, the president of the Richmond Fed and one of the inflation hawks, dissent from the committee's decision, preferring to start raising rates? If so, it would be the first dissent in more than a year, and a sign that a period of strong public consensus among the Fed leadership could be nearing an end.

-- Neil Irwin

NEIL'S MUST READS:

The Wall Street Journal explores how the end of the finance boom has made the sector a less attractive place to work, Christopher Hayes argues for a bit of inflation in a paper at the New America Foundation, and the Minneapolis Fed publishes a fascinating conversation with former Fed Chairman Paul Volcker.

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