Most analysts still believe Fed can hike twice this year.
Federal Reserve officials next week will continue to stress that they will be “patient,” and that is largely being interpreted at this point to mean no hikes until at least June, economists said.
Since the financial market turmoil after their December meeting, so many Fed officials used the word in their speeches that it felt like the central bank has “done all but take out a Super Bowl ad that repeatedly flashes the word “PATIENT,” said Blake Gwinn, a market strategist at NatWest, in a note to clients.
But what does patient mean exactly?
“A March hike is unlikely at this point, that’s how I would interpret patience,” said Andrew Hollenhorst, chief U.S. economist at Citigroup.
Vince Reinhart, chief economist and investment strategist at Standish, agreed: “They’re saying they are taking a pass on March.”
Fed officials will meet on Jan. 29-30 to set monetary policy for the next six weeks. Fed Chairman Jerome Powell will hold a press conference after the decision.
The Fed chief previously announced that he’ll talk with reporters after each of the eight meetings this year. In the past, Fed leaders only held press conference four times a year.
The trick for Powell and his colleagues will be to keep alive the notion that the Fed’s next move on rates will be up after a pause.
Monetary policy tends to follows Isaac Newton’s first law of motion that a body at rest will remain at rest and a body in motion will remain in motion unless they are acted on by outside forces, Reinhart said.
The Fed’s forecast would justify further tightening, and Powell has been upbeat about the outlook, Reinhart noted. The Fed has penciled in two quarter-point rate increases this year although officials have stressed the moves are not set in stone.
Reinhart said that Powell doesn’t want to be seen as pushing interest rate hikes. He wants to be pulled by the data.