Investing.com - With a second rate hike this year seen as a near certainty, the focus at the end of the Federal Reserve's two-day meeting Wednesday will be its next move.
Investing.com's Fed Rate Monitor Tool currently shows the odds of a June rate hike by the Federal Open Market Committee at 91.8%.
The FOMC is due to issue a statement along with updated economic forecasts and Fed member projections of the future path of interest rates, or the so-called "dot plot."
Fed Chair Janet Yellen is also due to hold a news conference.
Most economists believe the U.S. economy is operating at full employment, with the slowdown in first quarter GDP growth seen as transitory.
But the outlook for inflation is less clear with the core PCE, the Fed's key gauge of inflation, falling for three months in a row,
This may prompt the Fed to lower its inflation forecast for this year but maintain its projection of reaching its target of 2% next year.
Investors are looking to see if the Fed opts to focus on reducing its balance sheet or provide signals of its timetable for future rate hikes.
The March dot-plot indicated three rate hikes this year but opinion is divided on whether this will still be the case in light of the recent path of inflation.
“The press conference should provide some clarity on whether the next tightening step after June will be balance sheet normalization or a third funds rate hike,” Goldman Sachs (NYSE:GS) economists said.
“We expect a detailed announcement in September, but would not be surprised if it came in December as guidance has been mixed,” they said.
Morgan Stanley (NYSE:MS) experts expect an announcement on balance sheet policy in September, with a gradual reduction in the Fed’s holdings of some $4.5 trillion in Treasuries and mortgage-backed securities beginning in October.