Here’s everything to expect from the Federal Reserve’s policy meeting Wednesday

The

Federal
Reserve
has
a
lot
to
do
at
its
meeting
this
week,
but
ultimately
may
not
end
up
doing
a
whole
lot
in
terms
of
changing
the
outlook
for
monetary
policy.

In
addition
to
releasing
its
rate
decision
after
the
meeting
wraps
up
Wednesday,
the
central
bank
will
update
its
economic
projections
as
well
as
its
unofficial
forecast
for
the
direction
of
interest
rates
over
the
next
several
years.

As
expectations
have
swung
sharply
this
year
for
where
the
Fed
is
headed,
this
week’s
two-day
session
of
the
Federal
Open
Market
Committee
will
draw
careful
scrutiny
for
any
clues
about
the
direction
of
interest
rates.

Yet
the
general
feeling
is
that
policymakers
will
stick
to

their
recent
messaging,
which
has
emphasized
a
patient,
data-driven
approach
with
no
hurry
to
cut
rates
until
there’s
greater
visibility
on

inflation.

“They’ll
make
it
clear
that
they’re
obviously
not
ready
to
cut
rates.
They
need
a
few
more
data
points
to
feel
confident
that
inflation
is
heading
back
to
target,”
said
Mark
Zandi,
chief
economist
at
Moody’s
Analytics.
“I
expect
them
to
reaffirm
three
rate
cuts
this
year,
so
that
would
suggest
the
first
rate
cut
would
be
in
June.”

Markets
have
had
to
adjust
to
the
Fed’s
approach
on
the
fly,
scaling
back
both
the
timing
and
frequency
of
expected
cuts
this
year.
Earlier
this
year,
traders
in
the
fed
funds
futures
market
were
anticipating
the
rate-cutting
campaign
to
kick
off
in
March
and
continue
until
the
FOMC
had
cut
the
equivalent
of
six
or
seven
times
in
increments
of
quarter
percentage
points.

Now,
the
market
has
pushed
out
the
timing
until
at
least
June,
with
only
three
cuts
anticipated
from
the
current
target
range
of
5.25%-5.5%
for
the
Fed’s
benchmark
overnight
borrowing
rate.

The
swing
in
expectations
will
make
how
the
central
bank
delivers
its
message
this
week
all
the
more
important.
Here’s
a
quick
look
at
what
to
expect:

Though
the
quarterly
plot
of
individual
members’
expectations
is
pretty
arcane,
this
meeting
likely
will
be
all
about
the
dots.
Specifically,
investors
will
look
at
how
the
19
FOMC
members,
both
voters
and
nonvoters,
will
indicate
their
expectations
for
rates
through
the
end
of
the
year
and
out
to
2026
and
beyond.

When
the
matrix
was

last
updated
in
December,
the
dots
pointed
to
three
cuts
in
2024,
four
in
2025,
three
more
in
2026,
and
then
two
more
at
some
point
to
take
the
long-range
federal
funds
rate
down
to
around
2.5%,
which
the
Fed
considers
“neutral”
—
neither
promoting
nor
restricting
growth.

Doing
the
math,
it
would
only
take
two
FOMC
members
to
get
more
hawkish
to
reduce
the
rate
cuts
this
year
to
two.
That,
however,
is
not
the
general
expectation.

“It
only
takes
two
individual
dots
moving
higher
to
raise
the
2024
median.
Three
dots
are
enough
to
push
the
long-run
dot
25bp
higher,”
Citigroup
economist
Andrew
Hollenhorst
said
in
a
client
note.
“But
the
combination
of
inconclusive
activity
data
and
slowing
year-on-year
core
inflation
should
be
just
enough
to
keep
dots
in
place
and
[Fed
Chair
Jerome]
Powell
still
guiding
that
the
committee
is
on
track
to
gain
‘greater
confidence’
to
cut
policy
rates
this
year.”

More
immediately,
the
FOMC
will
conduct
a
largely
academic
vote
on
what
to
do
with
rates
now.

Simply
put,
there
is
zero
chance
the
committee
votes
to
cut
rates
at
this
week.
The
statement
from
the
last
meeting
all
but
ruled
out
an
imminent
move,
and

public
statements
from
virtually
every
Fed
speaker
since
then
have
also
ruled
out
a
decrease.

What
this
statement
could
indicate
is
perhaps
a
thawing
in
the
outlook
and
an
adjustment
of
the
bar
that
the
data
will
need
to
clear
to
justify
future
cuts.

“We
still
expect
the
Fed
to
cut
interest
rates
in
June,
although
we
don’t
expect
officials
to
provide
a
strong
steer
either
for
or
against”
following
the
March
meeting,
wrote
Paul
Ashworth,
chief
North
America
economist
at
Capital
Economics.

Along
with
the
“dot
plot,”
the
Fed
will
release
its
quarterly
update
on
the
economy,
specifically
for
gross
domestic
product,
inflation
and
the
unemployment
rate.
Collectively,
the
estimates
are
known
as
the
Summary
of
Economic
Projections,
or
SEP.

Again,
there’s
not
a
lot
of
expectations
that
the
Fed
will
change
its
outlook
from
December,
which
reflected
cuts
for
inflation
and
an
upgrade
for
GDP.
For
this
meeting,
the
focus
will
fall
squarely
on
inflation
and
how
that
affects
the
expectations
for
rates.

“While
inflation
has
hit
a
bump
in
the
road,
the
activity
data
suggest
the
economy
is
not
overheating,”
Bank
of
America
economist
Michael
Gapen
wrote.
“We
think
the
Fed
will
still
forecast
three
cuts
this
year,
but
it
is
a
very
close
call.”

Most
economists
think
the
Fed
could
raise
its
GDP
forecast
again,
though
not
dramatically,
while
possibly
tweaking
the
inflation
outlook
a
touch
higher.

On
a
broader
scale,
markets
likely
will
be
looking
for
the
Fed
to
follow
the
recent
plotline
of
fewer
cuts
this
year
—
but
still
cuts.
There
also
will
be
some
anticipation
over
what
policymakers
say
about
its
balance
sheet
reduction.
Powell
has
indicated
the
issue
will
be
discussed
at
this
meeting,
and
some
details
could
emerge
of
when
and
how
the
Fed
will
slow
and
ultimately
halt
the
reduction
in
its
bond
holdings.

It
won’t
be
just
Wall
Street
watching,
either.

Though
not
official
policy,
most
central
banks
around
the
world
take
their
cues
from
the
Fed.
When
the
U.S.
central
bank
says
it
is
moving
cautiously
because
it
fears
inflation
could
spike
again
if
it
eases
too
soon,
its
global
counterparts
take
notice.

With
worries
escalating
over
growth
in
some
parts
of
the
globe,
central
bankers
also
want
some
type
of
go
signal.
Higher
interest
rates
tend
to
put
upward
pressure
on
currencies
and
raise
prices
for
goods
and
services.

“The
rest
of
the
world
is
waiting
for
the
Fed,”
said
Zandi,
the
Moody’s
economist.
“They
would
prefer
not
to
have
their
currencies
fall
in
value
and
put
further
upward
pressure
on
inflation.
So
they
would
really,
really
like
the
Fed
to
start
leading
the
way.”