Jan. 24 - Historic changes are expected at the first meeting this year of the Federal Reserve, but Fed watchers at Brown Brothers Harriman and Scotia Economics don't think another round of quantitative easing will be one of them. Conway G. Gittens reports.
Traders on the Brown Brothers Harriman trading floor are preparing to hear from the Federal Reserve for the first time this year. Across Wall Street - trading desks expect the Fed to keep rates near zero for the foreseeable future, but for the first time in history, policymakers will give specific predictions on when Fed Funds rates will start to rise. That's one reason this meeting will be significant, says currency strategist Marc Chandler. SOUNDBITE: MARC CHANDLER, SENIOR VICE PRESIDENT OF CURRENCY STRATEGY, BROWN BROTHERS HARRIMAN (ENGLISH) SAYING: "The Federal Reserve is going to make its forecast of Fed Funds clearer, including when the Federal Reserve anticipates the first Federal Reserve rate hike of the Fed Funds rate. Right now they've been giving us a guidance that they're not ready to hike rates before the middle of 2013, but many people in the market suspect that will be pushed out and where most of the FOMC members won't expect a hike until 2014." REPORTER BRIDGE: CONWAY G. GITTENS, REUTERS REPORTER (ENGLISH) SAYING: "Another thing traders will be watching closely this time around are the voting members themselves. Four voting members come on, while four go off and that could change the tone of discussions this year." According to Fed watchers, those new voting members lean towards more stimulus compared to the outgoing voters, which increases talk of further quantitative easing, or QE3. But Derek Holt of Scotia Economics says the Fed won't be making that announcement after this meeting. SOUNDBITE: DEREK HOLT, VICE PRESIDENT, SCOTIA ECONOMICS (ENGLISH) SAYING: "I think the balance of opinion at the Fed may be open to future stimulus but probably judges right now as being a bit too premature. They would rather, instead, wait and see what kind of growth and inflation numbers they will be seeing and I'm betting that come summer - they'll be disappointed once again on both growth and the inflation profile that we will be dealing with at that point." And one more thing traders will be looking for - the Fed may debut for the first-time an explicit inflation target. Conway Gittens, Reuters