All eyes on economy as Fed rate decision looms

February 26 02:38 2016

An oil production cut is off the table — at least for now. So there goes one potential catalyst for higher stock prices right out the window. That raises the stakes for the Federal Reserve’s next policy meeting in mid-March, when the central bank will decide whether to hike short-term interest rates again after raising rates in December off zero for the first time since the 2008 financial crisis.635482841713875268-AP-Financial-Markets-Wall-Street

In addition to hopes for an oil production freeze or output cut by major producers (which now looks unlikely), the belief that the Fed will hold off on rate hikes has also been a key driver of the stock market rebound rally since the recent Feb. 11 low. But now even that hope could be in jeopardy after a speech Tuesday night by Fed vice chairman Stanley Fischer, who said the Fed “simply does not know” if it will hike rates at its March 15-16 meeting. Fischer also said it is still unclear as to whether the recent financial market volatility has bled into the economy and hurt growth.

That’s why incoming economic data — such as a reading on January durable goods orders Thursday and the latest revision to fourth-quarter GDP and personal income and spending data on Friday — is critical. Wall Street wants to see evidence that a recession is not a high probability event, but also wants to see data that suggests things are not heating up too much, either. In short, investors are looking for economic data that will keep the Fed on the sidelines — but not reignite fears that a recession is on the horizon.