Get ready for another bout of Fedspeak when the US Federal Reserve holds interest rates this evening
The US Federal Reserve will not be raising interest rates this evening.
Neither will Janet Yellen – or anybody from the rate-setting Federal Open Markets Committee (FOMC) – be holding a press conference to announce the non-decision.
That won't be enough to stop markets working themselves into a frenzy at around 7pm when a written statement is released by the FOMC announcing that nothing has changed.
Read more: Fed rows back on rate rise in April
Instead of looking at every glance, utterance and stumble from Yellen, the markets will quite literally be reading between the lines. In the naval-gazing, topsy-turvy world of central banks, however, this could be a big news story.
The Fed, along with the Bank of England, the European Central Bank and everybody else in the business of rate-setting, know how their words are interpreted.
Read more: Even the ECB is worried it might be losing credibility
They don't only partake in, but inflate, what any casual observer would call an absurdity where words matter more than actions, actions don't often mean what they are supposed to and everybody is so deep into second-guessing everybody else nobody really knows what to think on their own.
Billions will be at stake, with stock markets and currencies bouncing up and down as they storm through the document while keeping an eye on what everybody else is reading.
"The language they use will be very important," said David Stubbs, global market strategist at JP Morgan.
Investors feel the intense pressure to "closely examine the statement for clues on future rate hikes or any change in language," said Lukman Otunuga of currency traders FXTM.
Deutsche Bank agreed: "Markets have been feeling the chill so far this week but the conclusion of the FOMC meeting this evening should heat things up. With no press conference, all the focus will be on the tone of the associated statement."
What's in a word?
"Look for the word 'balanced' to signal that a June rate hike is still on table," Stubbs said.
Since few expect rates to increase today, what everybody will be trying to figure out is how likely the Fed will be to hike rates when it next meets.
That's right, people are trying to guess how the committee will act in seven weeks' time while also trying to predict exactly what will happen during those seven weeks, and how events during those seven weeks will be interpreted not only by the main economic players, but also by the Fed. To top it off, they'll be trying to work out how the Fed will interpret everybody else's interpretation of their own interpretation.
Read more: Inflation falls, but will the Fed still hike in June?
Simple. And here's how that looks in action:
"Despite a weak first quarter, the Fed should show some faith that data will improve and that higher interest rates will be justified at some point this year," said JP Morgan's Stubbs.
The economic landscape has morphed for the worst with incessant declines in oil prices and ongoing concerns over slowing global growth sabotaging the Fed’s efforts to take action. These factors have repeatedly caused the central bank to postpone rate hikes and with nothing changing fundamentally, a procrastinating Fed could be the ongoing theme for 2016.
– Market analyst Lukman Otunuga
Read more: Miners soar as Yellen gives grounds for hope
"The Fed will want to leave the door open for a June hike but it's hard to imagine that they'll dramatically change market pricing for it … How much this changes will likely hinge on what extent the Fed continues to acknowledge concerns about global growth and risks abroad," said Deutsche Bank analysts.
Capital Economics agreed with the "leaving the door open" analogy: "The Fed is very unlikely to raise interest rates. Nevertheless, we expect the Fed to leave the door open to a rate hike at the next meeting."
Don't expect the Fed to use that kind of language. They like to make traders work for it. It's all about the modifiers before that "balanced" word. If it says the decision was "finely balanced", hold on to your hats, it'll be a bumpy ride.