The biggest development to come out of this week's meeting of the Federal Reserve's policymaking group may have already been announced: a later statement, immediately followed by a news conference.
The Federal Market Open Committee is expected to make no policy moves at its second meeting of the year, keeping the benchmark federal funds rate near zero percent and continuing $85 billion in monthly purchases of Treasuries and mortgage-backed securities -- called quantitative easing -- to maintain low interest rates on business and consumer loans.
No action, for a while
"The economy is getting stronger, but there is still a long way to go for the jobless rate to get down to the range the Federal Reserve has targeted, and inflation remains very much under control," says Bernard Baumohl, chief global economist for The Economics Outlook Group. "There's no reason for the Fed to change course."
In December, the committee said it would continue its accommodating policies until the unemployment rate falls below 6.5 percent, so long as inflation remains below 2.5 percent. The unemployment rate stood at 7.7 percent in February, while the Fed's gauge for inflation showed a 1.2 percent year-over-year increase in January.
"If anything happens, it would be around the press conference," says Brian Rehling, chief fixed-income strategist for Wells Fargo Advisors. "I imagine there will be a line of questioning about an exit strategy."
Later statement, followed by talk
The timing of the statement, immediately followed by Fed Chairman Ben Bernanke's news conference, may be the only marked change in this week's action. Bernanke will talk at the presser a half-hour after the committee releases its statement at 2 p.m. to "better facilitate the release of information," according to a Fed statement last week when the new time was announced.
Before, the statement was released at noon and the chairman waited until 2:30 p.m. before his talk with reporters. In the interim, economists and investors made sport of interpreting each line of the statement, much like a teenage girl scrutinizing a note from her crush.
"I don't think it's terribly significant, but it's probably to minimize speculation and the potential impact on financial markets," says Greg McBride, CFA, senior financial analyst for Bankrate.
This time, Bernanke can pre-empt the mind-reading. In the talk with reporters, he's likely to face questions about how the FOMC will eventually tighten monetary policy when employment goals are met. The chairman has fielded similar questions recently from Congress, and the subject of Fed action is a hot topic among investors.
Talk of nervousness about bonds
Bond investors worry that when the Federal Reserve does change course, the action could flood the market with the bonds it has been buying to ease interest rates and decimate the value of bonds. So far, the Fed's balance sheet has swelled from $869 billion in August 2007 to $3.11 trillion this month, largely due to its three rounds of quantitative easing.
"We may never get to downsizing the balance sheet," McBride says. "The Fed may not sell those securities as much as letting them run off and mature."
Looking forward on action in the economy
In other action, the FOMC will release its economic projections for the federal funds rate, inflation, gross domestic product and unemployment. While there's been a spate of positive economic news since the last meeting, especially jobs-related, it's probably not enough data to alter the group's long-term projections, says Rehling. The Fed needs good data for several months before budging on its projections, he says.
Politics: Lots of talk, little action
That's not to mention the ongoing budget impasse plaguing the White House and Congress that could slow any momentum the economy is showing. These factors conspire to keep the Fed on its current course for the near term.
"The Fed is not going to do anything to hurt the momentum they have built up here," says Rehling, "especially as the fiscal issue remain unresolved."
Baumohl predicts the central bank won't make any moves until the fall. Until then: same stuff, different meeting.
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