Fed dilemma: Does slow growth require intervention?

Chairman Ben Bernanke told lawmakers recently that the "central question" confronting the Federal Reserve at its next meeting is whether growth is fast enough to make "material progress" reducing unemployment.

The answer may well be no.

Bernanke and his fellow policymakers gather Tuesday and Wednesday to revise their economic projections as recent reports on jobs, retail and manufacturing suggest the economic growth is slowing. Fed officials have said there's scope for further easing at some point to reduce a jobless rate persisting above 8 percent.

"They're not closing that employment gap as fast as they'd like," said Michael Feroli, chief U.S. economist at New York-based JPMorgan Chase & Co. and a former researcher for the Federal Reserve Board in Washington. "Bernanke has a clear economic mandate, and we're still far from achieving it."

Since the Federal Open Market Committee met on April 25, the Standard & Poor's 500 Index has slumped 5.5 percent. At the time, Fed policymakers raised the outlook for growth this year to a range of 2.4 percent to 2.9 percent.

A reduction in forecasts for growth at this week's meeting would help Bernanke justify more accommodation, economists said.

"The chairman is sympathetic to the perspective that the Fed should do more to promote growth," said John Ryding, co-founder of RDQ Economics in New York.

3M Co. Chief Financial Officer David Meline said this month that the weak economy may mean lower volume growth for the St. Paul-based maker of products including fuel-system tuneup kits and Post-it Notes.

"The economy itself is running at what many people consider to be a subpar type growth level," Meline said at a conference hosted by Deutsche Bank AG. The flagging economy makes boosting sales "a more difficult challenge."