Members of the Federal Open Market Committee will gather on June 21 22 amid a notable slowdown in domestic economic activity, resurgent concerns about the Eurozone periphery, and an impasse in government debt ceiling negotiations.
The skies are also clouded by accelerating core inflation rates. Against this backdrop, Chairman Bernanke will conduct a press briefing following the committee’s two-day meeting. Credit Suisse expects the tone of the FOMC policy statement and Bernanke’s prepared text to resemble that of the chairman’s June 7 speech in Atlanta on the U.S. economic outlook. In that address, Bernanke acknowledged the weakness of the recent U.S. economic data but suggested the soft patch will prove to be transitory. He also strongly implied that neither a new stimulus program nor a near-term tightening move is on the table. Credit Suisse anticipates the bottom line on Wednesday will be similar and expect the FOMC to continue signaling “exceptionally low levels for the federal funds rate for an extended period.”
The FOMC policy statement will be released at around 12:30 PM EST on June 22, and updated FOMC economic projections will follow at 2:15 PM EST as Bernanke delivers his prepared remarks to the press. An unscripted question-and answer session will follow.
The FOMC will have the opportunity to revisit its U.S. economic projections. The Committee in April already revised down its 2011 GDP growth forecast a few tenths to 3.1-3.3% from the January projection of 3.4-3.9%. It was unclear from Bernanke's speech whether he foresees another downward revision this month. Separately on Friday, the International Monetary Fund (IMF) cut its forecast for U.S. economic growth. The IMF reduced its outlook for U.S. economic growth in 2011 to 2.5% from 2.8% in April. It also lowered its 2012 GDP growth forecast to 2.7% from 2.9%.