From CNBC:

Federal Reserve Chair Jerome Powell is expected to reveal a major clue about future interest rate moves after the central bank’s meeting this week. The key wording change in the post-meeting statement will signal policymakers’ stance on potential rate hikes or cuts ahead. Markets eagerly await this development to adjust their expectations accordingly.

Analysts indicate that removing or keeping a certain clause from previous statements will significantly impact the direction of future monetary policy. Deutsche Bank economists expect a “meaningful overhaul” of the statement post-meeting. The outcome could determine whether the Fed will actively consider rate cuts and leave the door open for a March rate cut, in light of reduced inflation numbers.

Speculation on the Fed’s next move is ripe as markets gaze for clues on potential rate cuts. Despite earlier expectations for a March cut, recent statements from Fed officials indicate a more cautious approach, leaving investors uncertain. The target range for the fed funds rate remains high considering declining inflation, prompting expectations for a rate cut in the near future.

Chairman Jerome Powell will have a delicate balancing act during his post-meeting news conference. A vague stance in the post-meeting statement aims to allow for more flexibility, considering the evolving economic conditions between the January and March meetings. But it will be difficult for the FOMC to reveal its future course without including the quarterly “dot plot” projections.

Recent public statements by Fed officials reflect a cautious approach to rate cuts. A restrictive fund rate and declining inflation suggest that the timing for a cut needs careful consideration. Depending on the incoming data, the FOMC intends to avoid over-tightening and retain a suitable stance that aligns with economic growth and inflation levels.

The Federal Reserve’s hawkish stance in recent post-meeting statements may no longer be necessary, given the decline in inflation. With economic growth surpassing expectations, there’s a potential for the FOMC to consider rate cuts to balance inflation and economic factors. Traders are now pricing in the possibility of an interest rate cut happening in March, indicating a shift in expectations for 2024.



Read more: A change to this clause could be most important part of Fed meeting