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Investors to look for more clues on Fed’s inflation policy

Yahoo Finance’s Brian Cheung joins The Final Round to break down what investors should expect from the upcoming FOMC meeting and what to make of the Fed’s inflation policy.

Video Transcript

SEANA SMITH: Well, it's a busy week. The Fed meeting kicking off tomorrow. It's the last meeting for the Fed ahead of the presidential election. Brian Cheung, our Fed expert, is here with what we can expect.

And Brian, I think markets are hoping the Fed helps calm some of those nerves, some of the jitters that we saw creep into the market this week. But what should we expect to hear over the next two days?

BRIAN CHEUNG: Well, Seana, the Fed's been very clear that they're not even thinking about thinking about raising rates. So likely nothing surprising in that FOMC meeting that starts tomorrow and then wraps up on Wednesday.

But figured I'd present the things to watch for in a different format for this time. So let's make it like a "Letterman" Top 10, except I'll do Top 5 because otherwise I'll put people to sleep. But here are the five questions that I would have for Fed chairman Jerome Powell on Wednesday.

First of all, where's the forward guidance, right? The Fed says it's not thinking about raising rates, but what would it take for the Fed to just start thinking about it, rights? Markets want it, so are we gonna get it in that press conference?

Coming in at number four, the Fed has repeatedly said over the last few months that we need more fiscal policy. You can check the transcripts for literally any Fed speaker over the past few weeks. But, as we know, those phase four discussions in DC are going absolutely nowhere.

So what's Powell gonna say? Is he gonna push again, or is he just gonna throw his hands up? Third, the yield curve. So here's a stat for you. The 10-year yield has gone up 17 basis points since the Fed's last meeting. 30-year at its peak, 25 basis points.

So [INAUDIBLE] longer term are going higher, but that could be bad if the Fed wants to pull forward economic activity. So could the Fed use its balance sheet here, maybe tilt QE towards the longer end of the curve? Or maybe they'll even consider a yield curve control, yet again. Something worth watching there.

Number two, reading the dot plots. Of course, we're gonna get projections for where the federal funds rate might be through 2023. So I've got an idea for where it might be. Probably zero. But there could be some out-of-the-box members penciling in a hike.

That was the case for two of the 17 members in the June FOMC. So worth watching there. And then clocking in at number one, we've got jobs, jobs, jobs. So here's a fact for you. The job market has recovered faster in this crisis than it did in the last crisis.

But here's another fact. We're still 11.5 million jobs away from pre-pandemic levels. So if the Fed is going to prioritize the shortfalls of employment from the maximum level, as it said in its Jackson Hole change, what does that mean for the Fed policy going forward?

Powell's explanation will be very key to answering those questions. Again, press conference at 2:30, statement at 2:00 PM on Wednesday. We'll have the full coverage of that right here on Yahoo Finance.

SEANA SMITH: Brian, I like how you laid all that out. I hope some of our competitors aren't watching and stealing some of your questions that you have lined up on Wednesday. But it's great. He was very straightforward. We appreciate it.

Over the next two days we will be closely watching. And, of course, hopefully you'll get your question in on Wednesday. But Brian Cheung, thanks for breaking that down for us.