What to expect from Fed decision tomorrow

Yahoo Finance’s Brian Cheung previews what to expect from tomorrow’s Fed decision.

Video transcript

AKIKO FUJITA: Of course, that data among many that the Fed's going to be crunching in this two-day policy meeting, and we are seeing Treasury yields trading pretty flat ahead of that decision expected tomorrow. The 10-year T-note yielding about 1 and 1/2% right now. The central bank isn't expected to make any policy changes this time around, but investors certainly going to be looking for any signals on the timing of potential tapering of asset purchases. Our very own Brian Cheung is always on top of that meeting with a preview for us. Brian, what should investors be looking for?

BRIAN CHEUNG: Well, Akiko, the question is taper talk, taper talk, taper talk, could this be the meeting where the Federal Reserve first hints at tapering or slowing its $120 billion a month pace of asset purchases? Now on one hand, we've seen those inflationary figures go up, just as Emily was talking about, with the producer price index showing the fastest year over year or rather 12-month gain since the data set began in 2020. We see similar trends with the consumer price index, which came in for the month of May at the hottest year over year rate since August of 2008.

So will that pressure Federal Reserve officials to maybe start talking about pulling back its unprecedented accommodation? For what it's worth, we've had a number of discussions here on Yahoo Finance, including with New York Fed President John Williams, about their higher tolerance for a hot economy and whether or not that can spur any sort of taper talk. Take a listen to that conversation from two weeks ago.

JOHN WILLIAMS: We're talking about talking about how the economy's doing, where we see it going and understanding how that may play out over the coming months and really be thinking about those going forward. Right now, my view is we're nowhere, we're not near the substantial part of the progress marker, but of course, we always need to be analyzing where we are in the economy, where is that relative to our maximum employment price stability goals, and really, how do we get monetary policy position well to achieve those goals over the coming years.

BRIAN CHEUNG: OK, so you're not going to bring up that conversation in two weeks?

JOHN WILLIAMS: Bring up the?

BRIAN CHEUNG: The tapering conversation.

JOHN WILLIAMS: No, I think that we should be thinking through all of the issues around the economic recovery and thinking about what, thinking about policy options in the future. I just don't think the time is now to take any action.

BRIAN CHEUNG: And I want to remind our viewers that conversation was from two weeks ago, but you could kind of hear the New York Fed president whiffling a little bit with regards to that talk about possibly talking about tapering. Now of course, we've seen the Philadelphia Fed president, Dallas Fed president, including Fed Governor Randal Quarles, talk about their appetite to kick up those discussions now--

--So it seems like people flipping from team transitory to team maybe tapering, which would be something a little bit more interesting if there could be some Fed officials with the other side of that debate. But again, we won't have that policy decision until tomorrow afternoon. And of course, we'll have the full coverage of that and the press conference right here on Yahoo Finance.

AKIKO FUJITA: OK, Brian Cheung as always on top of that for us.