Fed on tap, not expecting much, Fed speak at end of week will clarify intent.
Later today the FOMC will release its policy decision in the first of this week’s two most anticipated announcements, with Friday’s employment report rounding out the list. There is almost no expectation that there will be a rate change this meeting, but futures are assigning near 70% odds of a hike in June. The committee will appreciate that June odds are high enough that it will not need to be overly aggressive in changing the market’s view, which was not the case going into the March meeting. Nonetheless, a 3rd hike before the fall is currently being discounted with just a 40% chance assigned to an additional hike in September. It is to be seen if the FOMC attempts to firm these expectations today, although given the recent spate of weaker economic data, we don’t expect them to be overly aggressive. Instead, we would expect an acknowledgement of recently weakening data, but enough strength to continue the normalization process. We also expect additional details on the portfolio normalization process, although it will likely also have an element of data dependency. While there will not be a press conference following this meeting, we will get additional details by the end of the week, as Yellen, Fischer, and Williams are each scheduled to speak on Friday. We will provide a post FOMC update following the announcement.