Photo: By trackrecord on flickr
At about 2:15, the FOMC comes out with its latest move.Deutsche Bank has a preview:
The one-day March FOMC meeting is the main focus of this week’s data docket. The biggest surprise in the January meeting statement was the lack of any meaningful language modification relative to December. The most significant development was the unanimous vote—a trend which we expect to continue today. However, the minutes of that meeting showed a moderately larger shift in attitudes among policymakers as participants “expressed greater confidence that the economic recovery would be sustained” and “strengthen” in coming quarters based on both reported economic data as well as anecdotal evidence from business contacts. In light of improving labour market data and an ongoing inflection in the inflation trend, we expect that today’s statement will express more substantial language changes while indicating that the current stance of policy will remain intact for the foreseeable future.
As for what to watch:
We will watch to see if the characterization of inflation expectations as “stable” is moderately downgraded, as well. The prior discussion regarding the likely course of inflation appeared to be less unified than that pertaining to growth and unemployment. Many participants expected measures of core inflation to remain near current levels in coming quarters as a result of significant slack in resource markets and stable longer-term inflation expectations. However, the minutes also indicated, “[T]he importance of resource slack as a factor influencing inflation was debated, and some participants suggested that other variables […] could be useful indicators of inflation pressures.” Despite evidence of improving economic activity, we continue to believe that QE2 will run to completion, although the more hawkish members of the Committee have vocally expressed that they will not support any additional expansion of the program.