Oil plunge, Russia crisis challenge US Federal Reserve

Washington (AFP) - The relentless fall in oil prices and Russia's plunging currency pose big challenges as the US Federal Reserve opens a two-day meeting Tuesday.The Fed's last meeting of 2014 was expected to confirm its path toward monetary policy normalization after holding its base interest rate at the zero level for six years to bring the country out of the Great Recession.But stagnating economies in Europe and Japan and slowing growth in China, coupled with the threats to markets and the financial system from the oil price and Russian crises, could force the US central bank to weigh a pause.While the world's most powerful central bank is unlikely to make any immediate changes to its interest rate and liquidity stance, it could signal via comments and economic forecasts a readiness to stick to that stance for longer than expected to help the global economy through a rough period.The main focus of the Fed, the US economy, has been growing strongly enough for the central bank to begin pulling away from the extraordinary easy-money policies in place since 2008.Unemployment has come down to 5.8 percent; job generation in November was unexpectedly strong; and year-end retail sales show consumers comfortable with spending and confident about the year ahead.The one question that has dogged the members of the Federal Open Market Committee, the Fed's policy arm, has been inflation: it has been too weak to confirm that the economy is motoring under its own power.And sinking prices of oil and other key commodities and many general imports have in the past two months slowed inflation even more.For weeks analysts have guessed that the main outcome of the FOMC meeting would be a change in the language it uses to steer market expectations on interest rate policy.Over the past year, the panel has repeatedly said that a Fed funds rate increase would only come a "considerable time" after the end of the quantitative easing program, which was wound up in October.
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