Fed Expected To Keep Interest Rate Low

The Federal Reserve has said again and again that it wants to keep interest rates low for a long time. But it keeps fiddling with how to express that commitment.

Another shift in that communications strategy is set to occur when the central bank’s interest-rate-setting committee gathers for two days of talks on Tuesday and Wednesday, as it’s the first meeting to be led by Janet Yellen, the new chairwoman. The Fed will release a policy statement and updated economic forecasts at 2 p.m. Eastern on Wednesday, and Yellen will hold a press conference at the end of the deliberations at 2:30 p.m.

With the Fed and the markets basically on the same page on the economy, the current near-zero interest-rate policy, and the rate of reduction in bond purchases, the central bank has an opportunity to revamp its forward guidance tool, now the chief policy instrument.

“They’ve got a little room to unanchor these things,” said Lewis Alexander, chief economist at Nomura Holdings Inc. in New York.

MarketWatch

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