Week Ahead: A Fed Meeting and Lots of Housing Data

Federal Reserve policy makers will garner a lot attention next week as they gather for a two-day meeting scheduled for Tuesday and Wednesday.

The question, of course, is what -- if anything -- the Fed can do to ward off another recession.

Last month the Federal Open Market Committee, which sets interest rates and formulates much of U.S. fiscal policy, announced a key interest rate would remain at a historically low level at least until mid-2013.

The move was extraordinary in that the Fed has historically shied away from revealing its long-term strategies, a policy that ostensibly gives it flexibility to modify its decisions if necessary.

But with interest rates locked in for another two years, and Congress averse to generating more debt by allowing the Fed to pump more cash into financial markets, its uncertain what the Fed can do except clarify its precise take on economic conditions in the U.S.

Investors will be parsing the central bank's words carefully.

Elsewhere, the economics calendar includes plenty of housing data, but not much else.

From next weeks releases investors will learn whether the housing sector got a much needed boost over the summer. On Monday the National Association of Home Builders housing market index, which gauges builder sentiment, is due and its expected to hold steady at its current low level of 15. According to Dow Jones Newswires, the index was regularly topping 70 at the peak of the housing boom five years ago. Not anymore.

Housing starts and permits are due on Tuesday and both numbers are expected to have declined in August. Existing homes sales for August are due Wednesday and demand is not expected to have increased much, if at all, in August.

The struggling housing market serves as a microcosm of the broader economic malaise that threatens to push the U.S. back into recession. No one seems to know what to do about it.

Despite record-low mortgage rates and a vast inventory of homes, the prevailing mood of economic uncertainty has left few Americans willing to make perhaps the biggest investment of their lives. So houses are sitting on the market and home values continue to fall.

With that in mind, a report on jobless claims for the week ending Sept. 17 is due on Thursday.