But its statement at 2 p.m. ET after a two-day meeting could shed some light on just how long Fed policymakers are prepared to hit the pause button. That message could move markets and provide a clearer picture of where rates are headed for credit cards, adjustable-rate mortgages and auto loans.
With the economic outlook growing cloudier in recent months, the Fed is virtually certain to hold rates steady, breaking from its pattern of hiking rates at every other meeting since December 2017. The big questions are: How many, if any, rate hikes do policymakers expect this year, and when do they plan to stop shrinking the Fed's balance sheet, an issue that could affect long-term rates.
The rate hike forecast, in particular, "it's going to grab the attention" of investors, says economist Kathy Bostjancic of Oxford Economics.
Here's a breakdown:Where rates are headed
In December, the Fed lifted its key rate by a quarter percentage point for the fourth time in 2018 to a range of 2.25 to 2.5 percent. Fed officials also downgraded their forecast to two rate increases this year from three.
Yet stocks plunged because investors believed the Fed should hold off on any rate hikes amid a slowing global economy, the U.S. trade fight with China and the fading effects of federal tax cuts and spending increases that juiced growth in 2018.
Fed policymakers promptly reversed course and promised "patience" on future hikes in public appearances and after a January meeting, noting the market selloff itself had battered consumer and business confidence, and that inflation had remained muted.NEWSLETTERSGet the Managing Your Money newsletter delivered to your inboxWe're sorry, but something went wrongA collection of articles to help you manage your finances like a pro.Please try again soon, or contact Customer Service at 1-800-872-0001.Delivery: FriInvalid email addressThank you! You're almost signed up for Managing Your MoneyKeep an eye out for an email to confirm your newsletter registration.More newsletters
As a result, markets broadly have rallied but the economic picture is still mixed. Morgan Stanley and Oxford Economics believe Fed officials Wednesday will predict one rate hike this year and another in 2020, based on their median estimate. But JPMorgan Chase figures policymakers will forecast no rate increases this year, a projection that likely would push stocks higher. Capital Economics reckons the Fed's next move will be rate cuts in 2020 as the economy wobbles.
The Federal Reserve building in Washington, D.C. (Photo: Getty Images)Fed's view of the economy
Economists generally agree the Fed will lower its forecast amid the sputtering global economy and a federal stimulus that's likely to peter out by the end of the year. Morgan Stanley estimates the Fed will revise down its estimate for economic growth this year to 2 percent from 2.3 percent in December but nudge up its 2020 forecast to 2.1 percent from 2 percent.
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With growth slowing a bit, the firm expects the Fed to project that unemployment, now 3.8 percent, will drop to 3.6 percent by year-end, up from its 3.5 percent estimate in December. It expects the Fed to maintain its forecast for core inflation, which excludes volatile food and energy items, at 2 percent this year, right at the Fed's target level. JPMorgan expects a cut to 1.9 percent.
The disparate views mirror an economy that has provided conflicting signals. Retail sales fell sharply in December and only partly rebounded in January. Manufacturing has softened substantially amid the overseas troubles while the service sector has strengthened. Meanwhile, the labor market has been healthy but employers added just 20,000 jobs in February – a poor showing that largely has been chalked up to weather effects but may also reflect a slowdown in hiring.
While the government shutdown likely damped growth early this year, a rebound is expected in the second quarter.Less balance sheet shrinkage
Since summer 2017, the Fed gradually had been shedding the $3.5 trillion in Treasury bonds and mortgage-backed securities that it purchased after the financial crisis to lower long-term rates and spur growth. As a result, the Fed's total asset portfolio has fallen to $3.9 trillion from a peak of $4.5 trillion.
Rather than sell the bonds, the Fed largely has stopped reinvesting their proceeds as they mature. As much as $50 billion a month in assets have rolled off its balance sheet, draining that amount of cash from the banking system and putting some upward pressure on long-term rates.
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But amid the market turbulence in December, Fed officials suggested they would likely stop reducing the balance sheet when it reaches about $3.5 trillion, more than the $2.5 trillion to $3 trillion previously anticipated. Many economists expect the Fed on Wednesday to formally announce when the balance sheet runoff will end, most likely in the second half of the year.
A relatively early end that stops rolling off bonds immediately, rather than gradually, could translate to slightly lower long-term interest rates that bolster the economy and markets.CLOSE
Federal Reserve Chairman Jerome Powell said Friday that he will not resign if asked to do so by President Donald Trump. Powell said the central bank intends to be flexible going forward in determining when to hike its key policy rate. (Jan. 4) AP