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Don’t Expect Surprises From Yellen Today

The economy has been sending mixed messages this week.

On Tuesday, the Commerce Department reported continued weakness in orders for durable goods like computers, cars, clothes and sporting equipment. Orders in December fell by 3.4 percent from the previous month, defying expectations that orders would increase slightly. New orders have been down for four of the last five months.

There’s a useful way of using the report to gauge business investment: Within the durable-goods report, orders for non-defense capital goods, excluding aircraft, were down 0.6 percent, the fifth decline in the past six months. “The data right now is showing a soft patch in capital spending,” said Bob Hughes, senior research fellow at the American Institute for Economic Research.

That contrasts with the sunny picture painted by the Conference Board’s release Tuesday on consumer confidence, which was better than expected. At 102.9, it’s the first time consumer confidence has been above 100 since August 2007, Hughes noted. Last month, that number was 93.1, and in January 2014, it was 79.4.

Hughes said consumer confidence is up for three reasons. The job market is slowly improving; the stock market is performing well; and gas prices are low, he said.

“You’re really seeing a big contrast between the business sector, what they’re experiencing, and how consumers are feeling,” Hughes said.

All that, he said, points toward a quiet session on Wednesday for the Federal Open Market Committee, which sets monetary policy. Hughes said the committee on Wednesday is unlikely to provide any surprise. “Right now, they’re looking at a somewhat mixed data picture,” Hughes said.

Inflation is still running below the Fed’s “target,” or the level of 2 percent at which it tries to keep inflation over the long run. With that, as well as the Fed’s earlier indication it would do nothing before April, today’s meeting is expected to be a relative non-event, Hughes said.

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