The Federal Reserve is expected to signal on Wednesday that its interest-rate policy will remain unchanged and close to zero through the end of 2023.
For the first time, the Fed will release its economic projections for 2023. Economists expect the Fed’s “dot plot” to show that most officials think rates will remain at 0.125%.
“It’s looking like rate hikes are going to be a 2024 story, at the earliest,” said Michael Gregory, deputy chief economist at BMO Capital Markets.
The Fed will release a policy statement at 2 p.m. Eastern on Wednesday. Powell will hold a press conference a half hour later.
While the unemployment rate has shown improvement, the lack of congressional action on another fiscal-aid package leaves the future path of the economy in doubt. The Fed may note the improved economy but not celebrate it.
Avery Shenfeld, chief economist at CIBC Capital Markets, thinks the Fed may adopt “conditional” forward guidance, with officials pledging not to raise rates until specific economic conditions are met.
This would follow the Bank of Canada’s promise not to raise rates until inflation is sustainably back to their 2% target.
Most other economists think a change in the Fed’s forward guidance will be delayed until later this year.
At the moment, the Fed statement says policymakers expect “to maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.”
Shenfeld said the path of Fed rate policy depends so much on issues that are impossible to pin down.
“If someone told me that ‘I don’t think they’re going to raise rates until 2024,’ and someone else told me ‘I think they are going to raise rates at the end of 2022’, I would