On pins and needles for the next words from the Fed

Nancy Marshall-Genzer Sep 15, 2014
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On pins and needles for the next words from the Fed

Nancy Marshall-Genzer Sep 15, 2014
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Federal Reserve watchers are obsessed with two words right now: “considerable time.” 

That’s how long the Fed says it’ll hold interest rates near zero after next month, when it stops pumping money into the economy by buying bonds.    

The Fed holds a meeting this week. Now, everybody’s wondering, what’s next? An immediate increase in interest rates?

“No,” says Jonathan Lewis, chief investment officer of Samson Capital Advisors. “I would say the economy has strengthened and so therefore that’s why they might change their language. They’ve got good reason to change the language. But not good reason to act.”

OK, so what does the Fed say after its meeting? It has to pick its words carefully. 

“So, this is the trick that they really have to pull off,” says Kevin Logan, chief US economist at HSBC Bank. “How to change their language without creating the impression that they’re likely to raise rates sooner.”

Because no one expects an interest rate hike until the middle of next year.

Any words to the contrary from the Fed would spook the financial markets, and nobody wants that. 

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