Expectations high for FOMC meeting as markets hang on one word

17th March 2015 By: Ranko Berich

FOMC Meeting – 18/03/15

It’s not often that a crucial monetary policy statement boils down to one word, but Janet Yellen has created the perfect set of circumstances for markets to do just this with this week’s FOMC meeting.

In her recent testimony, Yellen said that rates could rise at any subsequent meeting, just as soon as the Fed removes the word ‘patient’ from its statement on tightening monetary policy. Market attention will therefore be firmly fixed on whether the Fed is confident enough in the recovery to remove this word.

We’ve seen some soft data from the US recently, for example Friday’s Producer Price Index which indicated potential weakness in consumer prices, and the Fed has grounds to continue being patient with rate hikes. However, with expectations so high for a hawkish FOMC statement any disappointment could lead to a large pullback in the dollar, which has been utterly rampant this month.