The Federal Reserve Meeting, Inflation and Interest Rate Changes

The big news this week is the Federal Reserve's scheduled meeting tomorrow (Tuesday). However, the Fed is not expected to make any big moves and should keep interest rates steady at 5.25%. Despite some of the recent gloomy news, the economy has been performing well. Why? The Service Sector of the U.S. economy is chugging along on all cylinders; it’s the manufacturing part of the economy that is causing some economists to worry. That’s the sector that manufactures things and builds homes, which appears to be on the brink of recession while the Service Sector continues to surge. The simple truth is that the Manufacturing Sector represents only one-fifth of the economy, and is not as important as it used to be. The Service Sector is the motor that now drives our economy. So what will the Fed focus on? It will look intently for any signs of inflation in the Service Sector. The members of the Federal Reserve will scrutinize all the employment and labor cost statistics. They will be worried about the low unemployment figures and the recent increase in wages. The Fed will remain cautious on inflation but they won’t take action. Do not expect a rate cut anytime in the near future.