Fed Comments Leave Investors with Doubts

Comments by Federal Reserve Bank officials have some investors nervous that the central bank may not cut the Federal Funds rate next week as many assumed following recent poor employment numbers. 

Atlanta Federal Reserve President Dennis Lockhart said in a planned speech Monday morning that the recent jobs reports – the U.S. economy lost 4,000 jobs in August – while bad, should also be viewed with the same lens as "recently positive reports in retail sales." It was enough of a neutral stance that investors erased early gains on the stock market and sent the Dow Jones Industrial Average down about 40 points in midday trading today.

Over the weekend Philadelphia Fed President Charles Plosser said in reference to Friday’s payroll number that the Fed’s Open Market Committee doesn’t make rate decisions based on any one number.

The stock market lost 250 points on Friday after the jobs report rekindled fears that the economy was heading toward a recession. Investors and bankers are counting on the Fed to cut interest rates at least a quarter of a point from 5.25% to kick-start consumer and business lending to stave off slow growth. But the Fed has consistently said that inflation is its real target, not the markets.

Later today, the Fed will release consumer credit numbers for the month of July, a report that is expected to show a slow down in consumer borrowing in the month.