Washington (AFP) - The Federal Reserve opened its first monetary policy meeting of the year Tuesday to take the pulse of the US economy and mull the first interest rate hike since 2006.The Federal Open Market Committee, the central bank's policy arm, gathered as a powerful snowstorm blanketed the Northeast, grinding activities to a halt, in a reminder of the unusually severe winter weather in the first quarter of 2014 that helped to push the economy into contraction.The world's largest economy has since been back on the growth path, putting in a robust five percent expansion in the third quarter that is expected to slow to 3.2 percent in the fourth quarter, but still leaving the US a relative bright spot among developed economies.The FOMC meeting "will provide another chance for the Fed to assess the impact of the higher dollar and lower oil prices on the policy outlook. We don't anticipate major changes to the statement," said Barclays in a research note.After months of mostly positive data -- in December, the US unemployment rate fell to 5.6 percent and consumer confidence rebounded -- weak spots have emerged.Job growth slowed but remained solid; wages sagged, barely keeping up with inflation; and retail sales plunged broadly in a critical month for stores in the holiday shopping season.Data released Tuesday kept up the barrage of mixed signals.Consumer confidence, an indicator of how willing consumers are to opening their wallets, soared in January to its highest level since 2007, according to the Conference Board."Lower gasoline prices have boosted consumer sentiment to post-recession highs in recent months, and the particularly strong reading for January suggests the consumer sector remains upbeat" in the early part of the first quarter, Barclays said.In the housing sector, the Commerce Department reported new-home sales picked up sharply in December from November, and were up 8.8 percent from a year ago.The underlying trend in the housing market, however, pointed to a continued slowdown in price gains. The Case-Shiller 20-city price index rose 4.3 percent year-over-year in November, compared to 4.5 percent in October.A gloomy report on new orders for long-lasting manufactured goods was unexpected. Durable goods orders fell 3.4 percent in December, and November's revised decline was more than double the prior estimate.The durable goods orders, and a slew of big companies reporting weak earnings and blaming the stronger dollar, weighed heavily on Wall Street. The S&P 500 was down more than one percent and the Dow Jones Industrial Average dived more than 300 points in midday trade. - How 'patient' is Fed? -The FOMC's post-meeting statement Wednesday will be pored over for clues to the central bank's thinking on the timing for the first interest rate hike since 2006.The Fed has kept its key federal funds rate pegged between zero and 0.25 percent since late 2008 to support the economy's recovery from the deep 2008-2009 recession.In October, the Fed ended its massive asset-purchase program, or quantitive easing, and has signaled that a rate hike would be coming this year.According to a Bloomberg News poll of 53 economists, 45 percent see the hike coming at the Fed's June meeting, six percent put it in July and 30 percent in September.The FOMC in December said it "can be patient" in beginning to raise rates as it monitors the economy, with the labor market improving but inflation remaining well below its 2.0 percent target, which the central bank attributes to "transitory" factors such as lower energy prices.Since the December FOMC meeting, the rapid slide in oil prices has pulled weak inflation even lower, corporate earnings season has gotten off to a bumpy start, and the ailing eurozone was dealt a blow by Sunday's resounding victory of a leftist, anti-austerity party in Greece.The European Central Bank's announcement last week of full-scale QE to stimulate growth and avert deflation in the 19-nation eurozone, was expected to at least help the huge US trade partner in the short term.Join the conversation about this story »
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