The Federal Reserve on Wednesday is expected to lay the groundwork for its first interest rate hike in nearly a decade, as it continues to weigh whether the U.S. recovery can hold up against collapsing oil prices and a soaring dollar. The U.S. central bank’s latest policy meeting will conclude with certainty expected on one point: it will likely discard a pledge to remain “patient” before hiking rates, trimming one of the final verbal cues it has used through crisis, recession and recovery to describe its intent to keep rates near zero for a period of time.
The move would mark an important moment for Fed Chair Janet Yellen who, despite being seen as a policy dove, has overseen a steady whittling away of loose money promises: the policy statement during her first year as Fed chief shrank from 790 words to 529. While the turn in language would open the door to an initial rate hike as early as June, the uncertain path of the global economy remains a dilemma for central bank officials who say they want more confidence in the U.S. recovery and the eventual rise of inflation before committing to a rate “lift-off.”
The latest policy statement is scheduled to be released at 2 p.m. EDT (1800 GMT). The Fed will also provide updated economic forecasts by Fed policymakers. Yellen will also hold a press conference following the two-day meeting. The economic data, however, have been muddy – strong job creation, continued growth, and generally healthy consumer demand in the United States, but a global collapse in oil prices and a rapid run-up in the dollar that could mean the Fed remains far from its 2 percent inflation target.
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