The pace of rate cuts is an open question.
Another point of interest to watch out for on Wednesday: When the Fed does start to cut rates, what is that likely to look like? Rate cuts could come quickly and steadily, be large or small, and arrive earlier or later in the year.
Christopher Waller, a governor at the Fed, has already suggested that the central bank should be able to move rates down “methodically and carefully,” rather than in the big rate declines that have at times happened in the past.
Balance sheet details could be coming.
The Fed has been shrinking its balance sheet of bond holdings, after it grew sharply during the pandemic as the central bank purchased securities to help soothe markets and stimulate the economy.
Officials have been downsizing their holdings by allowing their securities to expire without reinvesting them. But policymakers will need to stop doing that at some point, because paring down bond holdings too much could cause chaos in markets.
In fact, minutes from the Fed’s December meeting showed that officials thought “it would be appropriate for the Committee to begin to discuss the technical factors that would guide a decision to slow the pace of runoff well before such a decision was reached in order to provide appropriate advance notice to the public.”
Will that discussion of the nerdy details come at that meeting? Economists will be on the lookout.