Investing.com – Though the Federal Reserve (Fed) will make a monetary policy announcement on Wednesday at 2:00PM ET (18:00GMT), markets expect it to serve as little more than a stepping stone on the way to changes to be announced in June.
Lack of details unlikely to disrupt markets
Wednesday’s event consists solely of the statement by the Federal Open Market Comment (FOMC) with its description of the economy and announcement of appropriate policy with an outlook involving few specific details.
The statement will not be accompanied this round by either updated economic projections or followed by a press conference with Fed chair Janet Yellen.
With consensus looking for no change in interest rates and Fed fund futures pricing in only a meager 5.3% probability of a move, according to Investing.com's Fed Rate Monitor Tool, there is little likelihood of the publication moving markets.
As usual, investors will look over the FOMC statement with a magnifying glass to evaluate any minute changes to the language.
However, no changes are expected to the “key” phrases concerning the outlook:
1. “The Committee expects that economic conditions will evolve in a manner that will warrant gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run.”
2. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction, and it anticipates doing so until normalization of the level of the federal funds rate is well under way.”
Investors could be in limbo ahead of Yellen and Fischer
With this backdrop, market participants will likely have to wait for appearances from Fed officials to receive further hints on the future path of policy moves, including not only further rate hikes, but also the central bank’s plans to unwind its balance sheet.
They may not have to wait long as both Yellen and the Fed vice chairman Stanley Fischer are scheduled for appearances on Friday.
For the moment, markets put the odds of the first rate hike arriving in June at around 60%.