What investors should expect to hear from the Federal Reserve on Wednesday

This week’s Federal Reserve meeting could be the last before the central bank sets the stage for how and when it will start to roll back the extraordinary easing policies it adopted to fight the pandemic. Fed officials are not expected to take any action as the meeting closes Wednesday. Nevertheless, they are expected to acknowledge signs of positive momentum in the economy when their statement is released at the end of their two-day meeting.

The central bank has now been operating on high alert for 14 months, starting when officials quickly slashed their benchmark overnight lending rate to zero. The Fed also instituted a series of programs to keep markets liquid and credit flowing as the pandemic shut down the economy. The economy is storming back, bolstered by fiscal and economic policy, as well as the growing numbers of people vaccinated against Covid-19. First-quarter gross domestic product, which will be reported on Thursday, is expected to show the economy grew by 6.5%. Second-quarter growth could be closer to 10%.

The Fed has taken unprecedented measures to stave off a worse economic crash and succeeded in keeping financial markets functioning. As a result, its balance sheet has ballooned to $7.9 trillion. The process of moving away from these policies is expected to be slow and deliberate. Bond strategists have been focused on when the Fed would start to unwind the $120 billion a month minimum in asset purchases, often termed quantitative easing, or QE. The consumer price index, which increased 2.6% from a year ago in March, is expected to rise above 3%. “This will be the message. … The Federal Reserve will look through it and so will market participants,” said Crescenzi.

What investors should expect to hear from the Federal Reserve on Wednesday, CNBC, Apr 28