Does the Fed save the ‘patient,’ or let it go this week?

Like a hospital soap opera, much of this week will boil down to what happens to the “patient.”

On Wednesday, the Federal Reserve will release the statement from its two-day Federal Open Market Committee meeting, and investors are keeping a sharp lookout for whether the word “patient” still appears in the statement, a key reference to when the Fed will begin hiking interest rates.

That one detail is crucial for how already-beaten-up stocks fare this week. Last week, the Dow Jones Industrial Average DJIA, -0.82%  shed 0.6% and the S&P 500 Index SPX, -0.61%  declined 0.9%, putting both indexes into negative territory for the year to date. The Nasdaq Composite Index COMP, -0.44%  shed 1.1% for the week but is still up 2.9% for 2015.

“The biggest short term question with regard to the March FOMC is whether the committee chooses to include the ‘patient’ term in their policy statement or drop it,” said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott, in a recent note.

“In terms of impact, retaining the word would imply a first rate hike would be most probable after June and by September 2015,” he said.

For quite a while, the consensus estimate had been that the Fed would start hiking rates in June, but analysts and economists are increasingly nudging the move out to September. LeBas believes the Fed will leave “patient” in its statement, signalling a rate hike closer to September than June.3

Market Watch

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam
Craig Erlam

Latest posts by Craig Erlam (see all)