The Federal Reserve’s Federal Open Market Committee has another meeting this week regarding U.S. interest rate policy. While no new rate announcement is expected to come, what is expected is the announcement of more tapering — some $10 billion by our take.
Janet Yellen and other Fed presidents have said on many occasions that they are comfortable with the $10 billion incremental notch in monthly bond buying. Most likely that will take place with another $5 billion less in Treasury buying and another $5 billion less in mortgage backed securities.
Investors also will need to remember that this is a two-day meeting, starting on Tuesday morning and ending with the formal announcement (statement) around 2:00 p.m. EST on Wednesday.
We will be watching for changes in how the Fed’s characterization of the economy, as well as changes in guidance, because the quarterly forecasts will be released on Wednesday as well. Look for a slightly lower growth forecast, but one that still allows for the bond tapering to continue.