The Federal Reserve is widely expected to announce another $10 billion monthly reduction in quantitative easing in Wednesday’s FOMC statement. But the focus will be on the Fed’s economic assessment, which could end up dramatically realigning investor expectations about when the Fed will hike rates.
In its previous statement, issued in late April, the Federal Open Market Committee noted that “growth in economic activity has picked up recently, after having slowed sharply during the winter,” but added that “labor market indicators were mixed” and “the unemployment rate… remains elevated.”
The economic outlook certainly seems to have improved since then. The last two employment reports showed monthly nonfarm payrolls growth of 282,000 and 217,000. And after a severely weak first quarter, several economists are looking forward to Q2 GDP growth around 4 percent.
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