by Calculated Risk on 3/19/2014 08:10:00 PM

On Fed Chair Janet Yellen's press conference ...

From Jon Hilsenrath and Victoria McGrane at the WSJ: Yellen Debut Rattles Markets

In a press conference after the meeting, Ms. Yellen suggested that interest-rate increases might come about six months after the bond-buying program ends—a conclusion that could come this fall. She offered that projection with many caveats, but some investors took it as a sign that the Fed could start raising interest rates sooner than expected.

As I noted earlier, I don't think QE3 will not end until January 2015 (that is the current path of a $10 billion reduction per meeting). That puts the first rate hike mid-year 2015 - if all goes well.

And from Binymin Appelbaum at the NY Times: Fed Cuts Bond Purchases by Another $10 Billion

The Federal Reserve further curtailed its economic stimulus campaign on Wednesday, announcing as expected that it would further reduce its monthly bond purchases because of the progress of the economic recovery.

The Fed ... policy-making committee said in a statement released after a two-day meeting that rates would remain at the current level, near zero, “for a considerable time” after it stops adding to its bond holdings, particularly if inflation remains sluggish.
...
The loose guidance about short-term rates replaced the Fed’s specific assertion ... that it would keep rates near zero at least as long as the official unemployment rate remained above 6.5 percent. ... “The purpose of this change is simply to provide more information than we have in the past, even though it is qualitative information, as the unemployment rate declines below 6.5 percent,” Janet L. Yellen, the Fed’s new chairwoman, said ...

With the unemployment rate at 6.7%, the 6.5% wording was no longer useful. Now the Fed will watch a number of employment and inflation indicators. According to the FOMC statement:

In determining how long to maintain the current 0 to 1/4 percent target range for the federal funds rate, the Committee will assess progress--both realized and expected--toward its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments.

Using several indicators keeps the options open.

Thursday:
• At 8:30 AM ET, the initial weekly unemployment claims report will be released. The consensus is for claims to increase to 325 thousand from 315 thousand.

• At 10:00 AM, the Existing Home Sales report for February from the National Association of Realtors (NAR). The consensus is for sales of 4.64 million on seasonally adjusted annual rate (SAAR) basis. Sales in January were at a 4.62 million SAAR. Economist Tom Lawler estimates the NAR will report sales of 4.60 million SAAR. As always, a key will be inventory of homes for sale.

• Also at 10:00 AM, the Philly Fed manufacturing survey for March. The consensus is for a reading of 4.0, up from -6.3 last month (above zero indicates expansion).