Fed Meeting Preview: Don’t Expect Much

The biggest question from economists and consumers is whether the Fed will continue with quantitative easing, but the FOMC will not be addressing that issue until later this year.

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key takeaways

  • Powell is expected to address inflation fears, which have been at the top of consumers’ minds
  • The Fed said in March that “indicators of economic activity and employment have turned up recently”

The Federal Open Market Committee (FOMC) is meeting again Tuesday. Following that meeting, Fed Chairman Jerome Powell will announce any changes in policy at 2 p.m. ET Wednesday, although experts are not holding their breath. 

“I do not have a strong feeling one way or another on tomorrow’s Fed meeting,” said Luke Gromen, founder and president of Forest for the Trees LLC. “Sometimes I do, but on this one, I just don’t think it will be that eventful.” 

The biggest question from economists and consumers is whether the Fed will continue with quantitative easing, but the FOMC will not be addressing that issue until later this year. 

“The next major issue facing this market will be when the FOMC admits that it’s considering tapering (or reducing) its QE program,” wrote Tom Essaye, founder of Sevens Report Research, in a recent note. “But while we think that does occur in the next two or three months, it is not going to occur at tomorrow’s meeting.” 

Addressing inflation fears

Powell is expected to address inflation fears, which have been at the top of consumers’ minds, but it is unlikely that he will stray from his current stance, which is that any price increases will be temporary. 

“In March, the Fed said inflation remained below 2%, but that’s going to likely change with Friday’s PCE Price Index,” wrote Essaye. “So, the Fed could admit that inflation is running ‘temporarily’ above 2%.”

The Fed said in March that “indicators of economic activity and employment have turned up recently.” The FOMC will likely focus on recent economic data, specifically the last two initial jobless claims reports and the March payrolls, which both suggested progress toward recovery, to reinforce this claim. 

With little policy changes expected, it is unlikely that we will see a significant market reaction tomorrow following Powell’s statements.

Following Powell’s statements, President Joe Biden will address a joint session of Congress at 9:00 p.m. ET. It’s expected that he will discuss the $4 trillion infrastructure and jobs plan.

On Thursday, the government’s estimate for Q1 gross domestic product (GDP) growth will be released in addition to the weekly initial jobless claims report. This data will help paint a picture of where the US stands in terms of recovery and what can be expected from the Fed going forward. 

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