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Factbox-Five things to watch at Fed policy meeting this week By Reuters


© Reuters. FILEPHOTO: This view depicts an eagle-shaped sculpture at the Federal Reserve building on August 1. The Federal Open Market Committee minutes will be released on August 1 in Washington. REUTERS/Larry Downing

By Ann Saphir

(Reuters) – Federal Reserve policymakers begin a two-day meeting Tuesday to discuss the U.S. jobs and inflation outlook and craft a policy response that could edge the central bank closer to dialing down its support for the economy.

These are the five key things you should be looking for at Wednesday’s meeting. It ends on Wednesday, February 2nd at noon. ET. (1800 GMT)


The Fed said it would not cut the $120 billion in Treasuries or mortgage-backed Securities it buys each month, until it has made “substantial more progress” toward its goals for maximum employment and 2% inflation.

Fed Chair Jerome Powell in August said he felt that bar has already been met on inflation, and saw “clear progress” on the employment front, making a bond program taper likely appropriate this year [L1N2PY1FI].

This was just before the unexpectedly low gain of 235,000 jobs reported by government officials last month.

Now that summer’s COVID-19 spike has waned, policymakers will discuss the future of jobs. There is also the possibility of persistent inflation.

Policymakers made progress toward their goals at their July meeting.

One way to get closer to making a decision to decrease their bond-buying is to add an adjective, such as “clear”, or “further”.


Fed policymakers want to separate a decision to taper asset purchases from a later decision to raise their short-term policy rate from near zero.

If Fed policymakers project forward to 2022, their expectations for the first rate increase in 2019, then Wednesday’s quarterly projections could blur that distinction.

The majority of respondents expected rates to remain at the current level until 2023, or earlier in June. Forecasts for 2024 will be included at this meeting.


Without lawmaker action to raise the current $28.4 trillion limit on federal government borrowing, the country will run out of operating funds on Oct. 1, triggering a partial government shutdown. The nation may run out of money to pay its bills in weeks.

Janet Yellen, Treasury Secretary, stated that defaulting would cause panic in markets and plunge America back into recession. This could also permanently harm the American economy.

Last time the country faced similar problems with its debt ceiling, Fed policymakers had in 2013 mapped out possible responses to what they considered could cause severe and potentially destabilizing market stress. Although it is unlikely that Powell will give a clear plan this week, he might be asked questions about the matter at Wednesday’s news conference.


This week’s meeting is the last before changes in Fed leadership that could prove to be anywhere from measured to historic, depending on how U.S. President Joe Biden uses the opportunity.

Randal Quarles will be retiring as Vice Chair for Supervision on October 13. Although he may remain Fed Governor, Biden will likely name another Fed financial regulator czar.

Biden will need to make decisions about whether Powell should be reappointed and who the Fed vice chair Richard Clarida to succeed him, whose term runs out on January 31st. One vacant seat remains on the Fed’s seven member board.

In the week leading up to the Fed’s November 2-3 session, an announcement may be made.


Other issues are also battling for Fed policymakers’ attention. Among them:

A U.S. stock market plunge on worry that a potential default by property developer China Evergrande Group could destabilize global financial markets.

After a dispute over how two Fed presidents handled securities trading ethics, Senator Elizabeth Warren called for an internal review to examine the financial policies of Fed officials.