Fed Meeting Confronted by Dilemma

While one crisis may be averted–a double-dip recession–it doesn’t mean we’re out of the woods just yet, economically speaking. When the Federal Open Markets Committee meets Tuesday, high unemployment will be top-of-mind. What to do about it has Fed watchers riled, with many remarking they’ve never seen the governing body more split.

“When you’re in a crisis, your mandate’s a little different and you’re not debating things,” Diane Swonk, chief economist at Chicago-based Mesirow Financial Inc., told Bloomberg News. “When you’re in the no-man’s-land” of a “post-crisis economy, it’s a lot harder.”

She notes the Fed’s difficulties are compounded by the fact that it has already cut the overnight interbank interest rate to near zero and FOMC members are divided about the costs and benefits of further easing through unconventional policies such as buying more bonds and increasing its $2.3 trillion balance sheet.

While policy makers aren’t likely to adopt any new initiatives at their meeting on Tuesday, they probably will announce a major asset-buying program in January, Bloomberg notes.