Markets Focus On FOMC Meeting – Economic Highlights

The market’s fixation on the word ‘patient’ notwithstanding, it will be even more important to keep an eye on the committee members’ projections and Yellen’s press event. Lowered GDP and inflation projections would be acknowledgement of the recent dollar strength and would be a clearer dovish signal than any verbiage in the statement. At the time of the December meeting, the committee had projected inflation to be in the 1% to 1.6% this year and 1.7% to 2% next year. With respect to GDP growth, the committee projected the U.S. economy to be bound by a 3% growth pace at the top end for both this year and next, with the low end of the growth band at 2.6% this year and 2.5% next year.

Lowered projections for GDP and inflation will represent a delayed rate hike even if ‘patient’ drops out from the post-meeting statement. While the June meeting has emerged as the consensus period when the FOMC will start raising rates. But recent market action in response to less than solid economic data indicates that investors still appear open to a later liftoff date. It is this “bad news is good news” mindset that provides the most rational explanation for the stronger market sessions in recent days following softer economic readings. I suspect that a downgrade to the committee’s growth and inflation projections will likely get interpreted in a similar way.


With respect to earnings, the 2015 Q1 earnings season got underway with the mixed reports from Oracle (ORCL) and Adobe (ADBE) after the close on Tuesday. The FedEx (FDX) report this morning didn’t help matters much either, with the delivery bellwether beating estimates for the February quarter, but providing lower guidance relative to current consensus estimates.