By James Langton

(December 18 – 07:00 ET) – The U.S. Federal Reserve Board is returning to center-stage this week after weeks of standing in the shadows behind the U.S. election furore.

The Fed is meeting on Tuesday. As evidence of a slowdown in U.S. economy continues to pile up, analyst are predicting that the Fed will move to a neutral bias from its current tightening stance. There is some hope that interest rates will be cut, too. The risk of energy-led inflation may keep the Fed from moving.

Economists from all of Canada’s major bank-owned brokerages agree that a neutral stance is likely. Only BMO Nesbitt Burns is willing to entertain the slight possibility of a rate cut. Otherwise, economists are predicting the Fed will cut early in the new year.

The only U.S. economic data preceding the Fed meeting is the trade data, due Tuesday morning. The deficit is expected to show slight improvement — about US$33 billion. Canadian merchandise trade numbers are due that mornin, too. Neither report is expected to have much impact, although they should reveal the cross-currents of slowing exports and strong domestic demand.

After the Fed meeting, Wednesday will bring reports on housing starts in the U.S. and retail trade data in Canada.

On Thursday, U.S. third quarter GDP numbers are due. Our October GDP numbers come out on Friday. Economists are calling for a slight rise. U.S. durable goods-order data is due that day. CIBC says, “Durable goods orders will show no meaningful recovery from October’s collapse.”

On the earnings front, it will not be a busy week. Unscheduled warnings have been the center of attention. On Monday, Solectron, Micron Electronics and Corel will report. Tuesday reports from Jabil Circuit, Manugistics, Crosskey Systems, Morgan Stanley Dean Witter, and Goldman Sachs are due. The brokers’ reports should be interesting indicators for Canadian financials.

On Wednesday, Palm, Research in Motion, Micron Technology, and Cabletron Systems will release their earnings. On Thursday 3Com, ConAgra and Cognos will report. Friday has no major releases scheduled.