Economists expect Fed to act on weak economic reports

The U.S. job market is flagging, and consumer prices are barely rising. The picture sketched by data released today is leading some economists to predict the Federal Reserve will announce some new steps next week to boost the economy. Applications for unemployment benefits rose last week, pointing to a fourth straight month of sluggish hiring in June. And consumer prices were pulled down in May by a plunge in gas prices. Weak job growth raises pressure on the Fed because part of its mission is to boost employment, while mild inflation gives policymakers more leeway to act. If inflation were threatening to accelerate, Fed policymakers might feel compelled to raise interest rates. The Fed’s policymaking committee meets on Tuesday and Wednesday. Fed officials are “likely to go into that meeting feeling a little chastened and looking for a way to support the economy,” says Jeremy Lawson, an economist at BNP Paribas. Rising expectations that the central bank will take some action sent stocks surging this afternoon. The most likely step next week would be for the Fed to extend a current program that swaps short-term Treasury securities for bonds with longer maturities. The program expires at the end of the month. Known as “Operation Twist,” the goal is to further lower long-term interest rates to encourage borrowing and spending. Read the full story here for more actions economists suspect the Fed may take to right the nation’s economic ship.