The FOMC And The Presidential Election

By John S. McClenahen History suggests that Chairman Alan Greenspan and his 11 voting colleagues on the Federal Open Market Committee (FOMC) won't raise short-term interest rates at their scheduled Sept. 21 meeting. The reason? "It has almost never done so between the party conventions and the [presidential] election itself," notes Global Insight, a Waltham, Mass.-based economic forecasting firm. But could Greenspan and his colleagues defy current conventional wisdom and also take a pass at their scheduled Aug. 10 session between the two major party conventions? Yes, says Global Insight, if U.S. economic growth falters. "In particular, if July's employment growth remains weak, the Fed will probably take a pass on raising the [federal] funds rate at its Aug. 10 meeting."

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