By Mike Copeland

Tribune-Herald business editor

Waco banker Bill Nesbitt said the Federal Reserve Board may not change interest rates when it meets this week, but it could provide some insight into where it thinks the economy stands.

Trying to stimulate the economy, the Fed in mid-January set the federal funds rate between zero and one-quarter of 1 percent, as low as it can go without charging any interest at all. The federal funds rate is the rate banks charge other banks for money.

Good economic news has surfaced recently in the areas of new home and automobile sales and employment. But Nesbitt, chairman and CEO of Central National Bank, said the Fed is a long way from raising interest rates.

Still, Nesbitt said he is anxious to hear the comments that come out of the board meetings today and Wednesday. They could give insight into what the Fed now feels about the economy.

The Fed’s opinion is important because its monetary policy affects everything from car and home loans to the interest banks charge businesses for working capital, Nesbitt said.

Baylor University economist Kent Gilbreath, a former board member of the Federal Reserve Bank of Dallas, said: “I think the Fed will hold interest rates steady until they have a better feel for the direction of the economy. New home sales and automobile sales are indeed rising, but not enough for the Fed to be worried about inflation.”

A recession creates signals “both downward and upward,” Gilbreath said, “but the Fed can’t be moving interest rates in a jerky fashion, up and down, based on short-term trends in the economy.”

Waco-based economic consultant Ray Perryman said recovery from recession has begun, “but the Fed wants to see if the recovery has legs before it starts moving in the other direction.”

The new recovery will start slowly and may not create jobs at first, Perryman said. He added that the Fed will most closely follow the gross domestic product.

Nesbitt said the Fed will really show how it feels about the economy when it begins to dismantle some of the policies it enacted about the time the banking crisis turned critical in September 2008.

This was a time, Nesbitt said, when mortgage assets had dropped in value due to the housing crisis.

“The Fed, which usually deals only with banks, began to make money available to people willing to buy those assets,” he said.

He added, “Maybe those policies will be coming down, which means the Fed thinks the worst is over.”

mcopeland@wacotrib.com

757-5736