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Why nobody is excited about today's Fed statement

Janet Yellen and the Fed aren't expected to make big waves after this Fed meeting.
Janet Yellen and the Fed aren't expected to make big waves after this Fed meeting.
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The Federal Reserve's Open Market Committee will be wrapping up its third meeting of 2014 today, and it looks likely the central bank will make very little splash.

Why do analysts expect the Fed will make almost no news at all? And what does it meanlooking ahead.

The road map is more or less set

"The surprise will be if they do anything surprising," says John Canally, vice president and economist at LPL Financial, an organization of independent financial advisors. "From the markets' perspective it should be a yawner."

The Fed is currently drawing down its third round of quantitative easing (or QE3), a policy in which the Fed makes monthly large asset purchases in an attempt to stimulate the economy. When the Fed first announced the program in September 2012, those buys totaled $85 billion per month. But since the taper was first announced in December, it as been coming at a rate of $10 billion per meeting — at its January meeting, the Fed pulled it back to $65 billion, and in March it dialed it down to $55 billion, so an announcement of a $45 billion monthly buy is expected today.

"The roadmap's pretty set — it would take a pretty good change or surprise in the data to do anything other than a $10 billion reduction per meeting," says Brian Rehling, chief fixed income strategist at Wells Fargo Advisors.

According to Canally, the general perception is that tapering will continue until late this year, after which the Fed will wait a while before it raises interest rates form their current near-zero level.

The Fed in its March meeting didn't give any specifics on this, just that the Fed would wait a "considerable time" after the end of QE3 before raising interest rates. Though Janet Yellen spooked markets at the post-meeting press conference by venturing into specific territory — she said the period could last six months, which surprised investors — but by now markets have chilled out.

"I think right now the market's first rate hike is priced in in maybe mid- to late-2015," says Canally.

Not much has changed since March

Since the FOMC last met, the job market has remained good-but-not-great, inflation is still on the low side, and in general the recovery is continuing its slow trudge out of the doldrums. With no major economic shocks to speak of since the last meeting a month and a half ago, it seems unlikely that the committee would feel it needs to ramp things up or cool the economy down in a big way.

That said, there will (as always) be a lot of parsing of words about how the Fed describes the state of the economy. And people will always read something into whether the Fed adds a "modest" or "moderate" or "robust" into the statement, even if policy doesn't change.

"That's not going to stop everyone from gnashing their teeth over the description of the economy," says Canally.

Yellen won't get to talk

The Fed started instituting press conferences in 2011, allowing reporters to ask the chair questions about what the FOMC decided and why. Those press conferences come after four of the Fed's eight annual meetings, and have often served to allow the chair to explain bigger policy moves.

"Typically I think you do see them make a bigger change, they do it during those periods when they do have a press conference scheduled," says Rehling.

The start of QE3, for example, came with a press conference, and the Fed's decision to drop its interest rate guidance regarding unemployment came last month, when there was also a press conference. When the woman in charge won't be there to answer questions, you can take it as a sign that the bank will be keeping the sweeping changes to a minimum.

What it means for you

The Fed's policy isn't expected to change because the economic outlook hasn't really shifted much. That means American consumers can expect more low inflation and more moderate job growth. But it also means interest rates are still low — for now. If wannabe homebuyers can afford the down payment, they may want to get into the market right now before the Fed further eases off of the low-interest-rate gas pedal.

According to Freddie Mac, the 30-year fixed mortgage rate is currently around 4.3 percent, up from around 3.4 percent a year ago but still low by historical standards and much more likely to go up in response to future Fed action than down.