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Wednesday, March 20

20th Mar - Special: Fed Watch

Federal Reserve's Open Market Committee concludes its two-day meeting. With slow/moderate growth, eurocrisis back at "orange level" and the recent worries over  the Fed's balance sheet expansion, the hawks  are expected to be muted.

The FOMC decided at an earlier date to prepare studies on the effectiveness and possible unintended side-effects of the asset purchase programs, and Bernanke will probably be questioned on them during the press conference. However, I think the real meat will be hidden in the minutes of the meeting - to be released at an later date.

One word of warning - no-one is expecting a surprise here. Any changes would ambush the markets - but luckily I'll be following the event and squawking. Looking forward to exchanging views with you people!

At 18:00 GMT, the FOMC Meeting Announcement will be released. No changes to interest rates or QE amounts are expeted. The FOMC macroeconomic quarterly projections will be published as well.

At 18:30 GMT Fed Chairman Ben Bernanke will hold a press conference.

Live video feed C-Span

Live Blog: Ben Bernanke’s Press ConferenceWSJ

Live markets commentaryFT

Liveblogging today's super-exciting Fed press conferenceWonkblog / WP

The Fed’s Exit  The Big Picture
The markets have begun to wonder whether the Fed (and other central banks) will ever be able to exit from its Quantitative Easing policy. We believe there is only one reasonable exit the Fed can take. Rather than sell its portfolio of bonds or allow them to mature naturally, we believe the Fed’s only practical exit will be to increase the size of all other balance sheets in relation to its own.

Fed to signal no let-up in easing yet  Nordea (pdf)
We expect the Fed’s policy and forward guidance to remain unchanged after next week’s two-day FOMC meeting, which concludes on Wednesday (summary).

FOMC Projections Preview  Calculated Risk

The Waning Effect of QE?  PragCap

The Fed’s exit will be gradual and difficult  Gavyn Davies / FT

Quiet revolution at the Fed spells inflation  Nordea (pdf)
Due to the strength of underlying fundamentals in the US economy, an elevated structural level of unemployment and the Fed credibly aiming for higher inflation we expect the US yield curve to continue steepening over the coming year or so as markets price in higher inflation (summary).

FOMC preview: QE programme in focus  Danske Bank (pdf)

A turning point  Free exchange / The Economist
Tomorrow, the Fed will release new economic projections, and Ben Bernanke will answer questions on Fed policy at an afternoon press conference. I suspect that the thrust of many of those questions will be: when are you going to start tightening?

Is the Fed's crystal ball rose-colored?  Wonkblog / WP
On Wednesday afternoon, the leaders of the central bank will release their forecasts for  levels of economic growth, unemployment and inflation they expect to see over the coming three years.

3 Numbers to Watch: BoE minutes, UK labour market, Fed forecasts  TradingFloor

Market Preview: Cyprus rejects bailout deal; FOMC meeting eyed  TradingFloor
European markets are likely to open marginally higher Wednesday. The Cypriot parliament yesterday rejected a proposal to levy tax on the nation's bank deposits. Meanwhile, the outcome of the FOMC meeting later today is likely to hold market interest.

US: Recovery No. 4: this time is differentDanske Bank (pdf)

What to Expect From the Fed TodayWSJ

Stability and the FedWSJ

FOMC to recognise improving economyTradingFloor
Mads Koefoed: Not much is expected from today's FOMC meeting. The committee is likely to acknowledge the better-than-expected data of late and lift its projections for GDP.

What Ben Bernanke would say if he stopped being polite and started getting realWonkblog / WP
We at Wonkblog are here to offer you a preview of sorts. We have five questions that ought to be asked of the chairman (and, if we know the Fed press corps, probably will be in some form).

or whom the bell will not toll: Fed ditches old-school tech in policy releaseMacroScope / Reuters

Fed Officials Forecast Slower Growth, Lower UnemploymentWSJ

Federal Reserve officials expect a slightly slower pace of growth and lower unemployment over coming years, in forecasts that also show a strong majority still expects the first interest rate hike to come in 2015.

Fed Must Juggle Transparency with FlexibilityWSJ
Federal Reserve chairman Ben Bernanke has made transparency the hallmark of his tenure, but transparency needs to share space with greater flexibility.

Parsing the Fed: How the Statement ChangedWSJ
Fed watchers closely parse changes between statements to see how the Fed's views are evolving. The following tool compares the latest statement with its immediate predecessor and highlights where policy makers have updated their language.

Fed not ready to stop the party just yetNordea

Fed Maintains $85 Billion Pace of Monthly Asset PurchasesBB
The Federal Reserve will keep up its bond buying at a pace of $85 billion a month even as the world’s largest economy and the job market pick up.

Fed Officials Trim Forecasts for 2013, 2014 Jobless RateBB
Federal Reserve officials forecast the nation’s unemployment rate will hit the central bank’s threshold for raising interest rates sometime in 2015, while projecting faster improvement in the labor market this year.

Fed holds firm to stimulus plan despite brighter economyReuters
The Federal Reserve on Wednesday pressed forward with its aggressive efforts to stimulate the U.S. economy, saying it would take into account risks posed by its policies but also how much progress it was making lowering unemployment.

Fed HoldsTim Duy’s Fed Watch

Bernanke to the Market: As You Were - WSJ
Fed Chairman Ben Bernanke left no doubt in the market about the Fed's course.

Redacted Version of the March 2013 FOMC StatementThe Aleph Blog

If Communication Is Effective...Tim Duy’s Fed Watch
Better communication in the latter two periods compared to 1994 helped foster a smoother implementation of policy.  And communication tools have only improved since the 04-06 tightening.  Consequently, we should expect that much of the increase in long-rates will occur before the Fed pulls the trigger on short-rates.  That lead-in will prevent the Fed's exit from being as disruptive as many people seem to fear.

Unconventional policy foreverFree exchange / The Economist