Fed Likely to Pen Rosier Forecasts, but no Policy Shift Expected


Federal Reserve policymakers are expected this week to forecast that the U.S. economy will grow in 2021 at the fastest rate in decades, with unemployment falling and inflation rising, as the COVID19 vaccination campaign gathers pace and a 1.9 trillion relief package washes through to households.

But investors who expect rosier projections to translate to any change in monetary policy when the U.S. central banks Federal Open Market Committee ends its twoday meeting on Wednesday will likely be disappointed.

The FOMC will not validate market expectations of an earlier and faster liftoff and will reiterate that its policy stance will remain very dovish for the foreseeable future, Cornerstone Macro economist Roberto Perli told clients in a note last week.

Bottom line, dont expect the FOMCs tone to change much.

The Fed has kept interest rates pinned near zero for the past year, and has promised to keep them there until the economy reaches full employment, and inflation has hit 2 and is on track to exceed that pace for some time.

Thats a higher bar for raising rates than it set in the past. With inflation falling short of the Feds target in recent years even when unemployment was very low, the central bank flipped its policy approach last year, pledging under a new framework to no longer act preemptively to head off inflation, and to aim for broadbased and inclusive full employment.

It is also buying 120 billion in Treasuries and mortgagebacked securities and has said it…

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