Here's a look at what economists and investors will be watching for when the Fed concludes its two-day meeting Wednesday.
During the Federal Reserve’s last battle with high inflation in the 1970s and 1980s, Fed officials didn’t talk much at all publicly. When pressed for information on Capitol Hill about the outlook for the economy and interest rates, former Fed Chairman Paul Volcker would disappear behind a thickening cloud of cigar smoke.
The yield on the 10-year Treasury note TMUBMUSD10Y has fallen sharply to 3.49% from 4.21% just after the Fed’s previous policy meeting. The S&P 500 stock-market index SPX also has gained ground. Slowing down the pace of rate hikes The Fed is widely expected to slow to to raise its benchmark rate by a half percentage point, a slower pace than the four 0.75 point rate hikes seen since June. This will bring the Fed’s benchmark rate to a range of 4.25%-4.5%.
Ellen Zentner, chief U.S. economist at Morgan Stanley, argued the Fed might change the wording to “some further increase” in the benchmark rate will be appropriate in order to give the Fed flexibility. The key for markets is how many Fed officials pencil in their dot above 5%, Groen said. In September, no Fed officials projected the terminal rate above 5%.In order to try to underline that it intends to hold rates at a high level, the Fed will project no rate cuts in 2023, economists said.
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