What to expect from today’s Fed decision

Yahoo Finance’s Alexis Christoforous, Brian Sozzi, and Brian Cheung discuss the Federal Reserve ahead of today’s meetings.

Video Transcript

ALEXIS CHRISTOFOROUS: The Federal Reserve set to meet again today to continue its planning on how to support the economy since adapting its lower for longer interest rate strategy. Yahoo Finance's Fed correspondent Brian Cheung is with us now. Good morning, Brian. So what are the expectations for today's meeting?

BRIAN CHEUNG: Good morning, Alexis, not very much. Much like the previous meetings, there's nothing particularly new on the monetary policy front. With the interest rates already backed up to near zero, the Federal Reserve leaning heavily on its 11 liquidity facilities that it's opened up to backstop markets, ranging from risky corporate debt to municipal bonds.

So the Federal Reserve probably expected to hold on pat for today. But what could be interesting is any sort of details that we could get from Fed Chairman Jerome Powell's press conference at 2:30, in addition to that new fresh print of dot plots that we'll get in the meeting today, which could show us projections of where policymakers see interest rates going for the next few years.

Keep in mind that before this meeting, the last set of dot plot projections that we got were in June. At that time, the horizon for those forecasts only went out to 2022. Now that we've got into the second half of this year, the SCPs, or the Summary of Economic Projections, will now include projections out to 2023. So this will be the first time that we're going to get any sort of previews from the Federal Reserve on where interest rates could be in the next three years.

And I think I have a little hint of where that might be, probably near to zero with the Federal Reserve having said time and time again that we're not thinking about raising rates at the time being. So that could be something worth watching again. But again, Chairman Jay Powell with a press conference at 2:30. The statement is going to come out at 2:00 PM. We'll have a full coverage of that right here on Yahoo Finance.

BRIAN SOZZI: Yeah, I'm sure you're right-- you're going to be right with that call. But the OECD, also out with a forecast of its own today, upgrading its outlook, but they still expect growth decline.

BRIAN CHEUNG: Absolutely, and that could be the same thing with the Federal Reserve. Keep in mind that when you look at things like unemployment, for example, the OECD has a very different measure of unemployment, but the Federal Reserve sticking very closely to its U3 unemployment as reported very every month by the Bureau of Labor Statistics.

The number of came in for the month of August lower than where the Federal Reserve saw the unemployment rate ending for the year 2020. That's based off of the June projections that they had put forth three months ago, so the Federal Reserve expecting the unemployment rate to be over 9% by the end of this year. As you know, the unemployment rate came in at just over 8% in the month of August.

So the Federal Reserve is going to revise down its estimates when we see that projection later today. I don't know to what level. It will probably be something lower than 8%. But the question is going to be, does that mean that we're out of the woods? And I think that the Fed Chairman Jerome Powell would likely say no. Keep in mind that we had an unemployment rate of 3.5% headed into this crisis at the beginning of this year, which feels like so long ago.

So I think the Federal Reserve will definitely say yes, our forecasts are improving. But I think you'd have to be careful to listen to Chairman Jay Powell, because as we've heard over the past, yes, the recovery is happening. But the speed of that maybe isn't as rigorous or fast as Fed policymakers would have originally hoped on the way out of this.

ALEXIS CHRISTOFOROUS: All right, Brian, thanks. And again, that decision from the Fed and the press conference coming down at 2:00 PM Eastern.