There have been varying statements about what the Fed plans to do and Chairman Ben Bernanke has made comments that state the Fed could increase or decrease it’s purchasing of bonds. The statement that will be made today depends on how the Fed has felt about the state of the economy and if it is still in need of support. In the announcement later today it is likely that whatever decision Bernanke plans to make it will not go into effect immediately. Most economists expect that the Fed will not be announcing a change at its interest rate target, which is at 0% to .25%. The statement made today is likely going to reiterate the Fed’s current plan to keep short-term interest rates near zero. It is also likely that there will be no change in the bond program where they are currently spending $85billion a month, this program is otherwise known as the quantitative easing (QE) program. There is a huge question though of when the Fed will actually start the tapering process of the QE. Economists at Morgan Stanley and Deutsche Bank do not expect to hear anything new today and are not expecting a change in the bond- buying program. However, they do expect to see the tapering process begin in the near future.
People watching the announcements will be looking for a difference in tone or word choice from Bernanke that might hint at when the tapering will actually begin. By analyzing what Bernanke says about the economy will provide important insight to the potential date of when the Fed might begin to pull the bond program later in the year. If he says that the economy is stable or improving than we can most likely expect the Fed to begin to pull this program in the coming future. A few months back Bernanke discussed how they were not going to change the short-term interest rate until unemployment was at 6.5%, which we are not currently at. This leads to further confidence in the fact that no changes will be announced today with regards to the Fed’s bond purchasing program. There is speculation however that Bernanke will try to be as clear as possible on what the job market will need to look like in order for the Fed to begin the process of tapering off their bond program.