Business Blog Posts

Another report on Monday showed home-builder sentiment rose this month but remained at depressed levels, fortifying views that the U.S. central bank would pump more money into the economy at its November 2-3 meeting.

"The industrial production report illustrates, if anything, economic growth is still slowing rather than beginning to pick up again, which is yet another reason for the Fed to unleash QE2," said Paul Ashworth, a senior U.S. economist at Capital Economics in Toronto, using market shorthand for a second round of quantitative easing.

Industrial production fell 0.2 percent, the first decline since June 2009, the Fed said. Economists had expected September's industrial production to rise 0.2 percent, the same as in August.

Separately, the National Association of Home Builders/Wells Fargo Housing Market Index rose three points to 16 in October, beating economists' expectations for a 1-point rise to 14.

A reading below 50 indicates that more builders view sales conditions as poor than good. The index has not been above 50 since April 2006.

The recovery from the worst recession in 70 years has slowed markedly, leaving unemployment uncomfortably high and inflation too low for the Fed's liking.

Frustration over the sluggish economy, in particular the 9.6 percent unemployment rate, could deal a blow to the Democratic Party in November 2 congressional elections. Republicans are expected to win control of the U.S. House of Representatives and pick up some Senate seats.

The tepid recovery is also proving problematic to the Fed.

The central bank, which cut overnight interest rates to near zero in December 2008, has already pumped $1.7 trillion into the economy by buying mortgage-related and government bonds. It now appears on the verge of launching another round of bond buying.

STIMULUS SIZE UNCLEAR

On Friday, Fed Chairman Ben Bernanke offered a strong signal that more monetary policy easing was imminent.

While financial markets have largely priced in a second round of quantitative easing, it is unclear how much money the central bank will inject and Bernanke offered few clues.

Some traders scaled down bets on the size of the stimulus on Monday. Perceptions the Fed would opt for gradual asset purchases rather than a big-bang approach saw the U.S. dollar rise against the euro for a second straight session.

Bargain-hunting after recent losses lifted prices for U.S. government debt, while U.S. stock indices rose slightly after better-than-expected results from Citigroup (C.N).