Markets hope to hear from a dovish Fed Wednesday, even though Fed Chair Janet Yellen may send a strong message that the central bank is likely to raise interest rates this year.
The Fed is widely expected to hike rates for the first time in nine years in September. Ninety-two percent of the participants in CNBC’s Fed Survey expect the central bank to begin raising rates this year, and the consensus is for 53 basis points this year, which would be the result of two quarter-point hikes.
“Our expectation is that the Fed is going to reiterate a desire to hike interest rates this year and signal it expects two hikes this year,” said John Bellows, portfolio manager at Western Asset Management. “Next year, they are currently expecting something like four rate hikes. I don’t think that’s going to change. I think its two hikes in 2015 , four hikes next year.”
“That is in some sense entirely consistent with what they’ve been saying all year. Just a few weeks ago, Janet Yellen laid out the case for hiking this year,” Bellows said.
Fed officials began their two-day meeting Tuesday and will release a statement and new economic and interest rate forecasts at 2 p.m. ET Wednesday. Yellen also holds a 2:30 p.m. press briefing.