Four events were slated for this fall with the potential to derail the weak economic recovery.
One of those, the Federal Reserve's "taper" of its large-scale bond-buying stimulus program, was postponed last week. Investors mostly expected the Fed to scale back its bond purchases at its September meeting. After the Fed's no-taper announcement and Chairman Ben Bernanke's dovish press conference, however, many market analysts expect the drawdown in the stimulus to come at the Fed's December meeting, or even later.
Another of those four critical economic events, the selection of a successor to Bernanke when he leaves early next year, is coming soon, but no one outside the White House is sure when. Administration officials have said that President Obama will make the nomination “in the fall,” which officially began Sunday. So it could be as early as this week that the nomination is announced. But in the past some Fed nominations have come significantly later in the year. In 2005, for instance, President George W. Bush waited until late October to nominate Bernanke for a term that began in January.
It’s widely believed that Janet Yellen, the vice chairwoman of the Fed, will be the pick. But it’s possible that the president could pick someone else not currently in the spotlight.
Meanwhile, the two other anticipated events -- both potential pitfalls for the economy -- will come to a head this week.
One is the showdown over funding the government. On Friday, the House passed a bill to fund the government at current spending levels and avoid a shutdown at the end of the fiscal year on Sept. 30. The bill, however, also contained a provision advocated by some conservatives that would defund Obamacare.
The Democratic-led Senate may pick up the bill and strip out the anti-Obamacare measure, sending it back to the House. In that case, or in the case that the Senate doesn’t act, the House likely will work on a separate measure to fund the government involving other spending cuts or more modest changes to the health care law.
The House also might get started addressing the fourth, and likely biggest, economic event of the year: raising the debt ceiling.
By Secretary Jacob Lew’s projections, the Treasury will run out of funds with which to pay the government’s bills sometime in mid-October. He has not been able to increase the government’s borrowing since May, when the debt ceiling became binding at roughly $16.7 trillion.
Republicans are insisting that a legislative increase of the limit be paired with spending cuts. The House may begin working on a measure to lift the cap this week. But with the debate over funding the government still unresolved, it’s not fully clear what House Republicans will ask for in their bill.
In other news this week, the Conference Board updates its consumer confidence index Tuesday morning and the University of Michigan reports its consumer sentiment index on Friday. The two should give a sense of how Americans are feeling about the state of the economy.
On Wednesday morning, federal agencies will issue a report on new home sales for August. It's not clear what the impact of rising mortgage rates will be on the housing market, but new home sales were expected to have risen in August.
And on Thursday, the Bureau of Economic Analysis will make the final revision to its estimate of second-quarter gross domestic product growth. It is expected to mark annualized growth up to 2.7 percent, up from an initial reading of just 1.7 percent.