It’s Go-Time for the Fed - January 30, 2019

The Federal Reserve’s two-day meeting concludes Wednesday.

The fed funds rate is expected to hold at 2.25-2.50%.

Attention turns to Fed Chief Jerome Powell’s press conference.

  • Powell will begin holding a press conference after every meeting vs quarterly. The Fed holds eight meetings each year.

Investors are likely to be focusing on two items – interest rates and the Fed’s balance sheet, which expanded during the bond buys placed earlier in the decade.

  1. Interest rates. In December, the Fed projected two rate hikes this year. Powell will probably reiterate the stance, with heavy caveats that emphasize the uncertain path of future rates.

  2. The Fed’s balance sheet. The Fed has been gradually allowing securities that mature to run off the balance sheet rather than replace them.

    In December, Powell reiterated the program was on autopilot, causing a tantrum in the market. In January, he suggested the program is flexible, and dependent on the economy.

    Investors would like a sooner-rather-than-later end game to be unveiled. That seems less likely to happen, but Powell will likely emphasize the Fed is willing to react to changing economic conditions.

Investor’s Corner

Up or down volatility sometimes follows Fed meetings. Long-term investors look past short-term noise and maintain their focus on the investment plan.