Business

The week ahead

Tom Hudson: The latest twist from the Fed

 

Nightly Business Report

The music is ending at the Federal Reserve, but the central bank will continue dancing around in hopes the economy picks up its tempo.

It has been more than a year since the Fed began what is called Operation Twist. (Yes, it’s named after the Chubby Checker song. The last time the strategy was used, The Twist topped the music charts.) The idea behind the monetary twist is to lower long-term interest rates with the goal of spurring consumers and companies to borrow and spend money.

It has worked. Kind of. If you can qualify for a loan, interest rates are low. Consumers are back spending money on cars and houses. Companies, though, remain misers.

The Fed is scheduled to end the operation at the end of the year.

On Tuesday and Wednesday in the week ahead, the Federal Reserve’s policymakers will meet to debate the effectiveness of all their twisting.

They will discuss what could happen if the music stops or slows down, and they will decide if they want to change their tune from mild concern about the economy to one of outright worry.

Unfortunately for the central bank, consumers, business and the federal government are not in tune with one another.

The government is gridlocked, and businesses are fearful even though consumer confidence is running high.

That economic dissonance makes striking the right chord for the Federal Reserve tough.

Tom Hudson is anchor and managing editor of Nightly Business Report, produced by NBR Worldwide and distributed nationally by American Public Television. In South Florida, the show is broadcast at 7p.m. weekdays on Channel2. Follow him on Twitter, @HudsonNBR.

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