America’s entrepreneurs are closely watching the U.S. financial markets this week. Why? After a summer of slight instability, the next three days just might provide the answers to many of the questions plaguing the economy.

Um, probably. The truth is, nothing is certain, ever, regarding financial markets. However, as the Washington Post tells us in “Three Telling Days for the U.S. Economy“, it’s extremely likely that data being released this week by the federal government is going to have a very significant effect — whether positive or negative.

From the article:

Today, Wednesday and Thursday are shaping up to be pivotal days for financial markets’ recovery from disarray and for the direction of the U.S. economy.

The much-anticipated announcement of whether, and by how much, the Federal Reserve will cut a key interest rate is to come at 2:15 p.m. today. During the week, earnings reports from four major investment banks will give a sense of how badly Wall Street has been hit by the credit crunch: Lehman Brothers (today), Morgan Stanley (Wednesday), and Bear Stearns and Goldman Sachs (Thursday).

More clues to what’s coming — from the Fed and from Capitol Hill — may emerge when Fed Chairman Ben S. Bernanke and Treasury Secretary Henry M. Paulson Jr. testify before a House committee Thursday. And important data about inflation come out today and Wednesday.

These developments could help stabilize markets and prevent their troubles from spreading further through the economy, or they could create new tumult.

“If there are no big surprises this week, then I think we will see the volatility in the financial markets go down,” said Howard Chernick, an economics professor at Hunter College in New York. “That doesn’t mean that the stock market will necessarily go up. That depends on what happens to the economy. But these wild swings will decrease.”

The article goes into more detail about the specific questions that will be answered by this data. Of greatest interest among them:

How worried is the Fed? The Fed’s policymaking committee has a target for the federal funds rate, the interest rate that banks charge each other for overnight loans, of 5.25 percent. That rate ultimately affects the cost of borrowing money by businesses and consumers through credit card interest rates, commercial loans and more …

How hard has the credit crisis hit the balance sheets at big brokerage houses? Assuming that the losses are fully disclosed, investors will learn how much the value of assets on the books at Lehman, Morgan, Bear and Goldman have been marked down. If the losses are manageable, the earnings reports would open the door for financial markets to continue to stabilize. But a few nasty surprises could make markets tremor all over again.

Is inflation still a threat? The producer price index is to be released this morning, and the consumer price index on Wednesday. These numbers will indicate whether prices are rising (for businesses and households, respectively) more than policymakers are comfortable with.

Read the entire article here, and be sure to let us know your thoughts in the comments section.