WASHINGTON (MarketWatch) – This week’s Federal Reserve meeting is perhaps the most closely-watched gathering of the year as the U.S. central bank prepares the groundwork for an eventual liftoff in interest rates.
There are several moving parts for investors. Here are eight things to watch for clues on when the central bank might a liftoff of short-term interest rates and what the tightening cycle might look like:
- Interest rates: No change here. The Fed will keep its target fed funds rate in a range between zero and 0.25% . where it has been since December 2008.
- Asset purchases: For the seventh straight meeting, the Fed is expected to taper its bond buying program by $10 billion, bringing QE3 down to only $15 billion per month.
- Forward guidance: The biggest potential change for the market would be any change to the Fed’s pledge to keep rates low for a “considerable time” after the central bank ends its asset purchase program, expected in October. It would be a sign that the Fed can no longer rule out tightening as early as March.
- Description of labor market: Analysts will be watching closely to see if the Fed repeats its concern that there is a “significant underutilization of labor resources.”
- Dot plot: Following the meeting the Fed will release an updated “dot-plot” showing where each member thinks is the appropriate target Fed funds rate at the end of 2015, 2016 and for the first time 2017.
- Economic projections: The Fed will be updating their economic projections for 2014 and 2015.
- Exit strategy: The Fed could agree on, and publish, an update of their exit principles. The Fed last published these principles in June 2011.
- Press conference: If markets decide that the Fed has been hawkish, look for Yellen to push back during her press conference, to start at 2:30 p.m.
See full story on marketwatch.com