FED SAYS IT BEST WHEN IT SAYS NOTHING AT ALL

Portfolio managers, analysts and ultimately the market expect the Federal Reserve (Fed) to keep its policy rate of 0-25bp on hold at today’s meeting. Inflationary pressures remain subdued, economic activity has only started to recover after a lackluster Q1, the dollar TWI has appreciated a further 1.4% since the April Fed meeting and there’s the small matter of whether, or arguably when, Greece may default and the fall-out for the eurozone.

I would go a step further and expect the Fed to make only small tweaks to its economic and Fed fund rate projections and for Fed Chairperson Yellen in her post-meeting press conference to not say much beyond the Fed remaining data dependent and the rate hiking cycle to be gradual. A dose of boring may be what jittery markets actually need.

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