Federal Reserve policymakers will meet this Wednesday to discuss and set the monetary rate for the months ahead. After a relatively quiet year so far, the Fed is not expected to make any major changes to policy, however, there are likely to be adjustments to the wording that the Central Bank uses.
Here’s what investors need to know ahead of this week’s meeting.
The Federal Reserve May Change Its Communications Approach
When the Fed last met in May, it released a statement saying that “In light of global economic and financial developments and muted inflation pressures, the Committee will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate.”
While the essence of this statement is unlikely to change, the Fed is likely to clarify some of their language after this week’s meeting. Most importantly, the Fed is likely to point to downside risks and specific data sets that it could use to guide the target money rate for the rest of the year. Transparency will benefit investors.
It is expected that the rate will remain between 2.25% and 2.5% after Wednesday’s meeting.
There May Be Some Disagreement Within the FOMC
The Federal Open Market Committee (FOMC) has largely stood behind Chairman Jerome Powel throughout the last year. However, some dissent may start to show. There is already evidence that some officials would like to see a rate cut, rather than maintain the current target rate.
James Bullard, the President of the St. Louis Federal Reserve has already said publicly that he expects a rate cut would be necessary in 2019. Bullard has voting power within the FOMC and is likely one of the members that would vote against a decision to keep the money rate stable.
While it’s unlikely that there’s enough support to force a rate cut yet, any dissenting members could indicate the growing favor for one before the end of this year.
What Do Investors Want?
Most investors and analysts want and expect a rate cut some time in 2019. A cut would stimulate the slowing economy and prevent a recession from developing.
An unchanged rate this week would be accepted in the investment world, but there is only so long that the economy can maintain steam without some form of assistance from the Federal Reserve.
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