Fed Meeting tomorrow

Tomorrow is Fed Day and the Bond market is eagerly waiting to hear the Fed's Policy Statement in light of the recent data showing moderate economic growth and tamer inflation. There is no chance the Fed will take any action on the Fed Funds Rate at this meeting, but as always, the Policy Statement itself will be closely scrutinized.

The latest data indicates inflation may be moderating. For example, the Core Personal Consumption Expenditure Index (PCE) was just reported at 2.1% year over year and closer to - although slightly above - the Fed's target zone of 1 to 2%. The Consumer Price Index (CPI) also came in tamer than expected, and also closer to the Fed's target. The Jobs Report showed a slight ease in wage-based inflation pressures. All this has the Fed feeling good about inflation heading in the right direction, which takes any chance of a hike off the table for now...and a cut could be considered later this year, if we see inflation dip below 2% and appear to be headed lower for a few consecutive months.