The Week Ahead: Taking away stimulus might be Fed's gift

December 14, 2013 

No one who asks for socks and underwear for Christmas really wants to see them when they unwrap their gifts. A vacuum cleaner may be practical, but a holiday surprise it is not. A gift certificate for an oil change will not be anyone's best present. A sensible gift may not elicit the awe and wonder of the holiday season, but months later that gift will be useful.

In the new week, the Federal Reserve faces the choice whether to be pragmatic or profuse. It's been six months since Chairman Ben Bernanke put investors, consumers and corporations on notice that his agency could wind down by the middle of next year its latest economic stimulus strategy: buying bonds to keep long-term interest rates low. Since then, the unemployment rate has continued to fall, housing prices have continued to improve, and the stock market has run up to new highs. Additionally, energy prices have fallen and official inflation gauges are low.

With his white beard and gentle manner, Bernanke slightly resembles a certain man who favors red suits and reindeer. But Bernanke and his monetary policy-setting committee may decide to take something away from the American economy this holiday season instead of giving it something. The group may finally have enough faith in the economy to announce on Wednesday when it will begin scaling down its bond purchases.

Like socks, underwear or a vacuum cleaner under the Christmas tree, less Federal Reserve support for the economy still will be useful well after the tinsel is put away.

Tom Hudson, financial journalist, hosts "The Sunshine Economy" on WLRN-FM in Miami, where he is the vice president of news.

He is the former co-anchor and managing editor of "Nightly Business Report" on public television. Follow him on Twitter HudsonsView.

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