The U.S. Federal Reserve is widely expected to raise its benchmark interest rate this week due to a tightening labor market and may also provide more detail on its plans to shrink the mammoth bond portfolio it amassed to nurse the economic recovery.
The central bank is scheduled to release its decision at 2 p.m EDT (1800 GMT) on Wednesday at the conclusion of its two-day policy meeting. Fed Chair Janet Yellen is due to hold a press conference at 2:30 pm EDT (1830 GMT).
"The expectation of a rate hike...is widely held, and has been reinforced by the most recent round of Fed communications," said Michael Feroli, an economist with J.P. Morgan.
Economists polled by Reuters overwhelmingly see the Fed raising its benchmark rate to a target range of 1.00 to 1.25 percent this week.
Markets are, however, increasingly anxious for the Fed to give a clearer steer on the timing and details of its previously announced plan to reduce this year its $4.2 trillion portfolio of Treasury debt and mortgage-backed securities, most of which were purchased in the wake of the financial crisis to help keep rates low and bolster the economy.
More detail could come as part of the policy statement or during Yellen's press conference. The central bank used the minutes of its last policy meeting to flag up a plan that would feature halting reinvestments of ever-larger amounts of maturing securities.
Under the proposal, a limit would be set on the amount of securities allowed to fall off the balance sheet every month. Initially, the cap would be set at a low level, but every three months the Fed would raise it, allowing deeper cuts to its holdings.
The Fed has yet to indicate the size of the monthly caps or their quarterly increases. After this week's meeting, policymakers meet four more times this year, with the Fed seen actually reducing its holdings either in September or December.
Reference: Reuters
Read more: http://www.reuters.com/
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