The Federal Open Market Committee (FOMC) meets tomorrow and on Wednesday with a statement and forecasts expected Wednesday at 7pm GMT, followed by Fed chair Janet Yellen’s press conference half an hour later.
Some expect the Fed to remove the reference to “considerable time” when setting a time frame for near-zero rates and maybe replace it, as it did ahead of the 2004-2005 monetary policy tightening cycle, with a nod to being “patient”.
But that belief has been complicated by the slump in oil prices that has pulled inflation expectations lower and caused the S&P stock index to post its first negative week in eight on Friday.
Client notes from Goldman Sachs, Citi and Bank of America/Merrill Lynch this week will deal with expectations for the removal of the wording, roughly agreeing that however close the call is, it is more likely than not that the phrase will go away.
“They are going to remove it; I don’t think Yellen is going to keep it in there just because of what we are seeing with the energy sector,” said Sean McCarthy, regional chief investment officer for Wells Fargo Private Bank in Scottsdale, Arizona.
The lack of consensus on the Fed’s move all but guarantees that whatever the FOMC’s statement the stock market will be volatile, as it usually is on Fed decision days.