Two-day Fed meeting begins today

The Federal Open Market Committee (FOMC), the policy-making arm of the Fed, begins its two-day meeting today without any of the drama surrounding prior gatherings when a potential rate change is a possibility.

In my view, we'll have to see rising employment before the Fed takes any action on its key lending rate.

What we will be looking for is any adjustments to August's policy statement that "economic activity is leveling out." Since Fed Chief Ben Bernanke is now on record as saying that the recession is likely over, we'll probably see language reflecting his recent optimism.

Core inflation, the CPI less food and energy, is still in a downward trend and there is plenty of slack in the economy, so the Fed is not yet under pressure to tighten in order to head off rising inflation.

In the meantime, we may see more hints about how policymakers may be prepared to eventually withdraw the heavy amounts of monetary stimulus in the system. Of particular interest will be whether the Committee makes any adjustments to its plan to purchase government securities.

Data have been upbeat lately, but Treasury prices and mortgage rates have been fairly stable. Keeping rates low has lent a fair amount of assistance to the troubled housing industry, and the Fed doesn't want to see a spike in rates choke of nascent demand.