by Calculated Risk on 6/23/2009 12:05:00 AM

The Fed is meeting over the next two days, and although there is no chance of a change in the federal funds rate, it is possible the Fed will announce additional purchases of Treasury securities or agency MBS (I think this is unlikely) or change the Fed statement to reflect the view that the federal funds rate will stay at essentially zero for some time (this is very possible).

The most recent statement read:

The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and anticipates that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period.

The "exceptionally low levels" phrase might have confused some people into thinking that a modest rate hike was coming soon, so it is possible that the Fed will change that phrase to indicate "the current low levels ... for an extended period."

No one expects a rate change this week, but a few investors expect a rate increase by August. This graph from the Cleveland Fed shows public expectations of the Fed Funds rate after the August meeting. Maybe the Fed will try to change those expectations.



A short preview from Bloomberg ...