The Federal Reserve's first policy meeting since Donald Trump won the election wraps up Wednesday, and analysts say the Fed is almost certain to raise interest rates for just the second time in a decade—though they also said Trump was almost certain to lose the election. Beyond the expected rate hike, market-watchers are hoping the Fed will give some clues as to whether it plans to step up the pace of interest rate hikes next year to keep the economy from overheating and driving up inflation. The Fed is expected to release forecasts and market data at 2pm EST, followed by a press conference from Fed Chair Janet Yellen at 2:30pm. A roundup of coverage:
- The AP reports that a rosy forecast for the economy will be a strong predictor of more rate rises in 2017. One big clue will be whether the word "roughly" is dropped from last month's statement that "near-term risks to the economic outlook appear roughly balanced," which would signal an improved forecast.
- The Wall Street Journal predicts that if rates do go up, the Fed will tweak its policy statement to drop last month's statement that the case for rate increases has "continued to strengthen." Analysts will be watching to see whether the Fed predicts an unemployment rate next year lower than the current 4.6%, which is below the 4.8% that was considered "full employment" in September.
- Jim Caron from Morgan Stanley Investment Management predicts that the Fed won't discuss Trump plans like tax cuts because he hasn't said much about exactly how he plans to implement them. "I think too much is unknown. They're not going to involve themselves in that," he tells CNBC. "They're going to do what they can do based on the economic evidence at hand."
- The AP notes that investors will also be watching the "dot plot" where the 17 members of the Fed's policy committee predict where rates might go, though it isn't an especially reliable indicator: Last year, the "dot plot" predicted four rate increases but there hasn't been one yet.
- The Financial Times predicts that Yellen will "present studied neutrality" when asked about Trump's plans for a mix of tax cuts and fiscal stimulus. The Times notes that markets are now beginning to pay more attention to Trump's plans than to the Fed's policies, and Wednesday may mark the day when the "baton" in the search for economic growth passes from central bankers to politicians.
- The New York Times looks at how the Fed's anti-inflationary policies could dampen the economic boom Trump has promised to bring in with major changes to government policy. The Times says investors should remember former Fed Chairman William McChesney Martin Jr.'s 1955 saying: "The Fed’s job is to remove the punch bowl just as the party gets going."
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