On Tuesday, September 16 and Wednesday, September 17, 2014, the Federal Reserve (Fed) will hold the sixth of its eight Federal Open Market Committee (FOMC) meetings of the year. This meeting will include a press
conference by Fed Chair Janet Yellen and FOMC members’ forecasts for the economy, the timing of the first fed funds rate hike, and the level of the fed funds rate at the end of 2014, 2015, 2016, 2017, and in the long run. In
recent years, markets have been conditioned to expect a greater possibility of policy changes at meetings accompanied by press conferences and new forecasts and, as a result, market participants have increased their odds that
the Fed will change “something” at this meeting. Although we continue to expect the Fed will again cut the pace of its bond purchase program (quantitative easing or QE) and remain on pace to exit QE by the fourth quarter of
2014, the odds have increased in recent weeks that the Fed will take some additional action. Arranged from most likely to least likely (in our view), at this week’s meeting the Fed….