Important FOMC Preview – Will We See A Correction?

No Change Is Expected to Rate’s or the QE Program

There are two unknowns that will decide whether tomorrow’s FOMC meeting is hawkish (hawkish – Fed worried about inflation) or dovish (dovish – less worried about inflation and more about weak growth). First, how does the Fed admit it is talking about tapering QE? Secondly, do the “dots” show a rate hike sooner than expected.

Regarding the tapering discussion, the key here is where the Fed admits the tapering discussion occurred. If it is officially in the statement, that will be a hawkish shock to markets because that will mean the Fed expects to taper in the next few meetings. Case in point, during the previous tapering cycle, the Fed essentially forecasted tapering of QE in the September 2013 FOMC statement, and tapering began two meetings later. Given that same timeline, admitting the Fed discussed tapering of QE in tomorrow’s statement would mean that tapering could occur in September, sooner than markets expected.