What to expect from the Fed's policy decision today

Yahoo Finance's Brian Cheung breaks down what investors can expect from The Fed's taper plans as Fed Chair Jerome Powell wraps up the Fed's FOMC meeting today.

Video Transcript

BRIAN SOZZI: Traders are, of course, locked and loaded on the Fed meeting today, and that's where we find Yahoo Finance fed correspondent Brian Cheung for a preview. Brian, good to see you here, and a very big Fed meeting-- Fed meeting today to say the very least.

BRIAN CHEUNG: Yes, certainly obviously a lot has happened in the six weeks since the Fed's last meeting, but the big focus today is going to be on tapering, tapering, tapering, and that's where we begin if you want to think about this as my three top questions or my FOMC, Federal Open Market Committee, three questions that I'm really focused on in this afternoon's announcement.

Kicking it off with number three, the question is really going to be where are we on the taper talk? Now, the expectation is for the Fed to likely say that they advanced taper discussions in this meeting but not actually announce anything quite yet, and that's because of the low expectations numbers that we saw for the month of August, both in terms of the jobs report and inflation data as well. So it seems like Chair Powell could tee up some sort of announcement in November but say merely that we're getting that advance notice in this meeting.

But coming in at number two, my second question in the FOMC three, are you cool with those Fed officials making stock trades? This was a bit of a dark-horse question that no one had expected the Fed to need to answer in the September meeting, but, of course, this all coming after the media reports that the Dallas Fed and Boston Fed presidents made a number of multimillion-dollar transactions over the course of 2020. It calls into question the ethics rules over at the Federal Reserve Board and the Federal Reserve System at large. So it seems like reporters, including myself, will likely be pressing him on that question.

But the number one question in this meeting really concerns the dot-plot projections. Number one, explain the dots. We don't know where they might be.

But again, for a refresher, the dot plot is a projection of where the 18 members of the FOMC could see interest rates going. You can see ahead of you the last time we got a dot plot, which was in June. The median member of the 18-member committee saw the case for at least two interest-rate hikes by the end of 2023.

Keep in mind that because we're starting the later part of 2021 here, the dot-plot projection that we'll get today will actually expand the horizon out to 2024. So in addition to whether or not we can see interest-rate hikes that are projected through 2023 get raised, it's possible we could even get a little bit of a hawkish surprise for how many interest-rate hikes these FOMC members see in 2024.

So a lot of things to watch for in this meeting. And as a reminder, the press conference will start at 2:30. The statement and the dot-plot will come out at 2:00. And, of course, we'll have the full coverage of that right here on Yahoo Finance.

BRIAN SOZZI: Brian, handicap this for us. What is the probability that Fed Chair Jay Powell acknowledges the Evergrande crisis?

BRIAN CHEUNG: Well, he'll at least get a question about it. Whether or not the Fed will want to hold its hat on any sort of downside risk on the Evergrande situation that's unfolding remains to be seen, and that's, I think, because, by nature, it is an unfolding story. It's not necessarily so clear if the Evergrande will have financial-stability implications rippling across the Pacific over stateside.

Now, of course, it's obviously-- when you consider this is a firm that's got over $300 billion in debt exposed in the world's second-largest economy, the implication is that if it does fail, it may have global instability risk. Now, of course, the Fed chairman is probably going to say something along the likes of they're monitoring the situation but aren't necessarily changing or tilting monetary policy while that news story develops. So it seems like you'll probably get a question about it. May punt on the implications of that but simply say the Fed is monitoring the situation.

BRIAN SOZZI: Big day for you. Brian Cheung, we'll check back with you later.

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