What Effect Will the Economic Outlook Report Have?


At 2pm the Fed with release a statement outlining the central bank's economic outlook. One of four such reports released each year. 

If the Fed downgrades its outlook, it is likely that Bernanke will announce the continuation of substantial Fed stimulus and bond purchases. Although this would be bad news for the economy, investors prefer to see the bond purchases continue since they keep bond yields high. If, on the other hand, the Fed upgrades its outlook, the Fed will probably move closer to reducing its bond purchases.

Ironically, therefore, a vote of confidence in the US economy will likely lead to higher interest rates and lower stock prices. 

The bank has pledged to keep interest rates near zero as long as joblessness is above 6.5 percent and the inflation outlook is below 2.5 percent.

In March, the Fed predicted economic growth between 2.3 and 2.8 percent this year. For 2014, it envisioned growth ranging from 2.9 percent to 3.4 percent. It forecast that the unemployment rate would fall between 7.3 percent and 7.5 percent by the end of this year. By the end of 2014, the Fed envisioned the rate between 6.7 percent and 7 percent.