The Week Ahead: As Yellen ascends, Fed must keep economy on even keel

January 25, 2014 

Confidence is a tricky emotion. Too much confidence comes with the risk of becoming cocky and presumptuous. A lack of confidence fuels hesitation and uncertainty. None of these are envious economic qualities.

The Federal Reserve's interest-rate committee meets in the new week. On Wednesday, the group will send off outgoing Chairman Ben Bernanke and welcome the new head, current Vice Chairman Janet Yellen. But investors won't be waiting for a retirement speech. Instead, the central question is whether the group remains confident enough in the U.S. economy to continue to reduce its stimulus efforts.

This reduction was first announced six weeks ago. It was the beginning of the much-ballyhooed taper. The Fed cut back on the amount of money it was spending to buy certain bonds, thanks to growing confidence in the American economy. While much economic data points to

strengthening, the job market remains stubborn.

In December, job growth was anemic. Maybe it was the weather. Perhaps it was in anticipation of the Affordable Care Act's individual health insurance mandate taking affect. Also, the share of Americans counting themselves part of the workforce continued dropping. While some of that is fueled by baby boomers retiring, a growing number of American workers are just giving up, frustrated by the lack of jobs.

The Fed, though, is unlikely to give up its effort to cut back just as it has begun. It needs to project just the right amount of economic confidence.

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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