Recent US economic data are likely to make Federal Reserve officials more cautious when the federal open market committee meets this week to assess monetary policy developments and prospects. And they should. But the policy makers’ reserve won’t dramatically alter the central bank’s policy guidance, at least for now. The statement issued by Fed officials at the conclusion of their discussions on July 26 - and the fuller details provided by the minutes that will follow in a few weeks - are likely to provide the following signals on three immediate issues. None of this should constitute major market-moving developments in the short term. But behind the scenes, the Fed will continue to deal with an unusual degree of economic uncertainty and fluidity. This includes the factors associated with the basic understanding of today’s wage dynamics, inflation determination and productivity patterns. As such, there will be a lot of underlying work on key policy parameters for the longer term, including the specification of the neutral rate, the approach to containing the risk of future financial instability, the threat of greater political interference, and the assessment of market yields that are now heavily influenced by developments in Europe. All in all, this week’s meeting is unlikely to trigger market, economic or political fireworks. But that shouldn’t mask some consequential challenges facing the Fed. Due to political factors, the central bank is having to deal with the unintended consequences and collateral damage of yet more delays in the much-hoped-for policy hand-off that I have written about repeatedly -- that is, from excessive reliance on monetary policy to a more comprehensive policy approach that unleashes higher and more inclusive economic growth while securing genuine financial stability. <em>Bloomberg</em>