The Federal Reserve’s policy-setting committee meets next week and investors will once again be looking for clues as to the timing and trajectory of interest rate hikes.
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The central bank’s Federal Open Markets Committee meets Tuesday and Wednesday with a policy announcement due at the conclusion of Wednesday’s meeting.
The FOMC is widely expected to wrap up the Fed’s long-running bond purchasing program known as quantitative easing. Since last December the Fed has been gradually scaling back its monthly bond purchases by $10 billion each month. The amount of purchases now stands at $15 billion per month, but Fed policy makers have indicated they will phase out the entire amount at the October meeting.
The next step in a return to normal monetary policy after years of stimulus programs is raising interest rates from their current near-zero range. The big question is whether the Fed next week will alter the language of its statement to eliminate the phrase “for a considerable period,” which has been used to describe how long rates will remain low after quantitative easing ends.
For months the Fed has said rates will remain low “for a considerable period” beyond the end of QE. A number of Fed policy makers have called for eliminating the phrase in order to prepare global markets for the inevitability of higher rates.
Also on the calendar next week is a report on durable goods orders due Tuesday and the release of the final third-quarter GDP figure out Thursday.
Bellwether companies reporting earnings include drug makers Pfizer (NYSE: PFE) and Merck (NYSE: MRK), and tech giant Facebook (NASDAQ:FB). Facebook, whose numbers are out Tuesday, will look to duplicate Yahoo!’s (NASDAQ:YHOO) stellar quarter reported this week, and avoid the poorer-than-expected results reported by Amazon.com (NASDAQ:AMZN).
Coffee retailer Starbucks (NASDAQ:SBUX), always a good measure of consumer sentiment in terms of how often consumers are willing to pay as much as $5 for a cup of coffee, reports earnings Thursday.