FORTUNE -- When Federal Reserve officials meet today and tomorrow, Wall Street may not get the clarity it has been looking for.
Up until a few weeks ago, it was pretty clear what the central bank was up to, at least for the near future: To help the job market improve, the Fed would buy $85 billion a month in Treasury bonds and mortgage-backed securities until the economy improves substantially.
Last month, however, Federal Reserve Chairman Ben Bernanke said the central bank may slow down its bond buying program within just "a few meetings," even though unemployment still stands at 7.6%. This has confused investors; since May, yields on 10-year Treasuries jumped by about half a percentage point. More than that, any pullback would signal that the economy may be doing better than most of us think.
That may or may not be true, but some are now calling out the Fed for giving the economy a far too rosy outlook. And President Obama hinted on Monday that he may not reappoint Bernanke for a third term.
In every year of the economic recovery, the Fed has overestimated how fast the economy would grow, as The Wall Street Journal noted Monday. Its monthly survey of private-sector economists shows that forecasters on average expect the economy to grow 2.3% this year and 2.8% next year -- lower than the Fed's latest growth projections, made in March, which average growth closer to 2.6% for 2013 and 3.2% for 2014.
Officials might be too bullish again, but the Fed hasn't always been more optimistic. It depends who you ask and whether they're worried more about unemployment or inflation.
Recall last year when a spate of better-than-expected economic data failed to convince the Fed from turning off the money spigot. In February 2012, after the unemployment rate fell to a three-year low of 8.3%, Bernanke defended the central bank's decision to hold interest rates at record-low levels for the next three years.
True, he acknowledged the economy was doing better, but he also said it was "sluggish"at best as he worried about the implications of debt problems in the U.S. and Europe. Bernanke defended the Fed's prescription against Republicans who are worried its purchases could encourage prices to rise rapidly in the years ahead.
It may be too early to say who is right, but so far inflation doesn't appear to be a problem.
At its meeting this week, Fed policymakers probably won't slow their monthly asset purchases until at least December, according to two-thirds of 39 economists and investment strategists surveyed by CNNMoney. Some noted that the so-called "tapering" may not begin until 2014.
That may or may not keep interest rates from rising further, but it may at least say a lot more about the health of the economy.
Inflation isn't rising and the job market, while doing better, is creating just enough jobs to keep up with population growth. So why are rates rising?
FORTUNE -- A curious thing is happening with interest rates -- often the single-most critical influence behind economic and business decisions. Since the financial crisis, the costs of borrowing have sunk to historic lows after staying relatively low for the most part since the early MORENin-Hai Tseng, Writer - Jun 14, 2013 9:04 AM ET
The market might have loved the number, but that doesn't mean we should.
FORTUNE -- Good, but not too good. That's what the market wanted, and that's what it got.
In May, U.S. employers had 175,000 more workers on their payrolls than they did the month before. That made May the fourth-best job month for hiring out of the past eight. Any signs that we are headed toward a double dip recession MOREStephen Gandel, senior editor - Jun 7, 2013 12:25 PM ET
Volatility is on the rise, liquidity is getting tougher in certain places, and anxiety is on the rise.
By Mohamed A. El-Erian
FORTUNE -- Those trading in many market segments would have noticed a subtle change last week: Volatility is on the rise, liquidity is getting tougher in certain places, correlations are morphing, and anxiety has increased. Moreover, rather than impact all market segments simultaneously, such dislocations seem to be cascading MOREJun 3, 2013 5:00 AM ET
The regulations meant to strengthen our big banks may be leaving the U.S. with more troubled small banks.
FORTUNE -- The number of banks in danger of failing is the lowest since the beginning of the financial crisis. That sounds like good news, until you consider this: There are still 11 times more problem banks in the U.S. than there were back in early 2007, before the financial crisis. And the MOREStephen Gandel, senior editor - May 31, 2013 5:00 AM ET
No one wants to go back to the brink, but honestly, what have our nation's leaders learned since the last near-collapse?
FORTUNE -- Almost a century ago Thomas Marshall, Woodrow Wilson's Vice President, got tired of listening to senators blather on about the nation's needs and uttered the words that made him immortal: "What this country needs is a good five-cent cigar." Today, with 24/7 blathering as our national political pastime, MOREAllan Sloan, senior editor-at-large - May 22, 2013 5:00 AM ET
According to a new report, the jobless rate for 15- to 24-year olds in the richest countries is at a decades-long high and isn't expected to drop much in the next few years.
FORTUNE -- Being jobless is an awful thing for anyone no matter where they live. But it's especially unnerving for young people just starting their careers. A lot has been written about the topic lately, but two new MORENin-Hai Tseng, Writer - May 13, 2013 12:11 PM ET
As bad as things are -- especially for the poor, the young, the unemployed, and other vulnerable segments of the economy -- things need to get worse to overcome the enormous active inertia that is now embedded in the political systems and institutions.
By Mohamed El-Erian
FORTUNE -- In Happy Feet, one of my 9-year-old daughter's favorite movies a few years ago, a young penguin (Mumble) takes on the colony's wise MOREMay 13, 2013 9:04 AM ET
It was another good quarter for banks, but they're not quite fixed.
FORTUNE -- The credit crunch may be over, but we are crawling our way out.
After rising for all of last year, bank lending dropped in the first three months of the year, according to FDIC data compiled by bank research firm Bankregdata.com. The drop comes as low interest rates are squeezing how much money banks can make from their MOREStephen Gandel, senior editor - May 8, 2013 7:00 AM ET
It was a stronger-than-expected jobs report, but we're still a long way from the Federal Reserve's key target of 6.5% or lower.
FORTUNE – If the U.S. Federal Reserve's remarks earlier this week seemed at all vague, today's jobs report should give us a clearer picture of what the central bank might do next to boost the economy.
U.S. businesses added 165,000 jobs in April. Stocks soared and Wall Street cheered, as MORENin-Hai Tseng, Writer - May 3, 2013 11:25 AM ET
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