FOMC Preview: No Changes Expected

There will be a one day meeting of the Federal Open Market Committee (FOMC) on Tuesday, December 13th. The FOMC statement will be released around 2:15 PM ET on Tuesday.

Although there are several topics currently being discussed - such as adding a probable path for the Fed funds rate to the quarterly forecasts, and another round of QE ("QE3") by buying additional Mortgage Backed Securities (MBS) - those possible changes are more likely to be announced early next year.

So I expect no changes to interest rates, or to the program to extend the average maturity of its holdings of securities, or to the policy of reinvesting principal payments.

The FOMC statement might be changed to reflect the slight improvement to incoming data - but the wording changes will probably be minor. The trends the FOMC mentioned in November have continued: "economic growth strengthened somewhat", "unemployment rate remains elevated" and "Inflation appears to have moderated". And the downside risks remain: "there are significant downside risks to the economic outlook, including strains in global financial markets".

So I expect few changes to the FOMC statement, and the key sentence will remain unchanged: "The Committee ... currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013."

Charles Evans will probably argue for additional policy accommodation and he is likely to dissent again.

Yesterday:
• Summary for Week ending Dec 9th
• Schedule for Week of Dec 11th