FOMC Meeting: What will the FED do?

Who can forget the last 2014  FED´s  meeting, when Janet Yellen talked for the first time of a possible date for rate hike, and talked about the probability of  a couple of months, and not before April? During the December meeting, the FED said that it would be "patient" on rates, and said it was unlikely they will change the economic policy at least for a "couple of meetings", with Chair Janet Yellen clarifying then that a couple of meetings meant not before April. At the time, the Central Bank was confident on the economic outlook, saying that that the “economic activity has been expanding at a solid pace” and market run to price in a rate hike for June.

But as the months went by, persistent softness in the US economy, with macroeconomic data printing some horrid numbers, has diminished hopes the Central Bank will act that soon. 

On its latest March meeting the Central Bank decided to remove the world "patient" as scheduled, but at the same time added that "an increase in the target range for the federal funds rate remains unlikely at the April FOMC meeting," and that "just because we removed the word 'patient' does not mean we will become impatient." Furthermore and in a subtle way, officers were not that optimistic about growth, and expressed concerns about a strong dollar, by stating that "economic growth has moderated somewhat” and “export growth has weakened.”

FED's officers rhetoric over the last month  decreased from hawkish by the end of March, to clearly dovish during the  last couple of weeks.  Atlanta Federal Reserve President Dennis Lockhart surprised with a  hawkish stance late March when he said he would increase interest rates midyear, but finally recon Q1 data was "notably weak" returning to its usual dovish stance. 

Inflation in the US has shown some signs of life, as the latest readings show that core CPI climbed 0.2% in March,  nudging the annual rate to 1.8% from 1.7% in February, but employment figures have been quite a disappointment with March's job creation at 126K far worse than the average 250K of the previous month.  The Central Bank may still raise rates in June, but it has made it clear that a rate hike is data dependant, with inflation and employment being the keys. Should inflation and employment readings disappoint after this meeting, September will be a more likely bet for a move.

That a rate hike is the next FED's move, is out of the question. The problem is when is the FED going to do it. According to the Minutes of the FED's March meeting, several policymakers said that the Central Bank should raise its benchmark interest rate in June, although others wanted the move to take place "later in the year." 

So far, the range time for a rate hike has been therefore set in between June and September. Considering the slower economic growth seen during the first quarter of this 2015 investors are weighing the latest, as the most probable date for a move. 

For the most, expectations are of a no change in the economic policy this time, and there is no scheduled press conference for after the meeting. A press conference will only take place if the Central Bank decides to hike rates by surprise, something quite unlikely at the time being. 

Investors are eager to know when the Federal Reserve will act, but the most probable scenario is that they won't get much clues this week. Attention will shift then towards the Minutes to be released later in the May and any change in the wording of the statement.