At 2:15 PM EST we’ll see the latest monetary policy decision from the Federal Open Market Committee, and analysts are expecting that it will be a snooze.Despite rumours that the Federal Reserve has been considering “sterilized” quantitative easing—essentially, purchasing assets without increasing the money supply—most analysts agree that the Fed will put any decisions on hold amid the wealth of positive economic data we’ve seen so far this year.
What’s more, Chairman Ben Bernanke already testified that the committee is keeping a close eye on elevated oil prices, which could lead to inflation as the year progresses. Despite this threat, Bernanke has repeatedly affirmed that FOMC does not see inflation as a threat right now.
The lack of a press conference after the decision sets the meeting up to be an even bigger bore on an already slow day for markets.
JP Morgan’s Michael Feroli demonstrate that lack of excitement in a note this morning:
We expect a relatively uneventful outcome following tomorrow’s FOMC meeting. We do not expect any balance sheet actions, nor do we anticipate any strong signaling that such actions are likely to occur at a subsequent meeting. Because tomorrow’s meeting is a one-day meeting there will be no new economic projections or funds rate projections, nor will there be a post-meeting press conference. To the extent there is any news it is likely to come from changes in the wording of the FOMC statement.
UBS economists agree:
We expect the March 13 FOMC meeting to provide little new information about policymakers’ thought processes or the possibility and composition of any further easing. Rather, this meeting will likely show the committee is in “wait and see” mode as the economy continues to post quite healthy job gains.
I think they’ll make it very clear that the Fed’s in wait-and-see mode, which has been the case for some time. For some reason a lot of market participant were expecting imminent QE3, which I don’t think will happen now that the data is coming in a little bit better.
Deutsche Bank’s Colin Tan, however, thought that the meeting might be (vaguely) more interesting for markets:
DB’s Peter Hooper is not expecting any new balance sheet measures or any changes in rate policy guidance. The FOMC may discuss possible policy tools if the economic prospects were to deteriorate significantly so a variation of the current ‘operation twist’ or a ‘sterilised QE’ as foreshadowed by the WSJ may get some air time but these details will likely be fleshed out in the minutes next month. The Fed may also sound slightly more upbeat on the outlook given the recent improvement in labour data. Interesting to see how this will be interpreted by the markets though given the interplay between a firmer outlook and liquidity policy.