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Don't expect a definitive answer from this week's Federal Open Market Committee (FOMC) meeting on when the Fed will begin tapering its massive quantitative easing program.
Instead, the focus will be on the FOMC's statement, which will be scoured for clues about when scaling back QE3 could begin.
"We do not expect any modifications to the asset purchase pace or forward guidance at this meeting, so markets are likely to hang on every word change in the statement," Michael Hanson, an economist at Bank of America Merrill Lynch Global Research, said in a research report.
This month's FOMC meeting is the last before September, the month the markets have been expecting the Fed to announce "the taper."
Brian Gardner, senior vice president of Washington Research at Keefe, Bruyette & Woods, said the economic outlook will be key to finding taper clues.
"We do not expect any changes in policy (either for large-scale asset purchases or for Fed funds rates) but the commentary on the state of the economy could be significant," Gardner said in a research note. "As Fed officials have recently reinforced their intent to look at the outlook for the labor market and the economy, any change in the Fed's description of the economy could provide a better idea of when the Fed might taper asset purchases."
But, Gardner added, "Our guess is that any change in language will be nuanced and keep the markets guessing about when the Fed will taper."
He said Friday's jobs report may ultimately be as significant as the FOMC statement in terms of gauging when tapering would take place.
This Week's Fed Meeting: Big Market Mover?
Federal Reserve Chairman Ben Bernanke is not expected to hold a news conference after the two-day meeting, which ends Wednesday.
Bernanke had one after the June 18-19 FOMC meeting, and his comments fueled speculation the $85 billion a month in asset purchases would be tapered this year and ended altogether in 2014.
That had an immediate effect on the markets.
"The Fed walked out the taper talk a few days after they laid it out and stocks fell 300 points," Money Morning Capital Wave Strategist Shah Gilani said. "That woke them up."
Majority of FOMC Members Seek to Extend QE
While minutes from the June meeting show growing sentiment inside the Fed to end QE this year, a majority of the 12 voting members of the policy-making FOMC hoped to extend the bond-buying into next year.
What factors are likely to keep the Fed from going ahead with tapering QE in September?
Second-quarter gross domestic product, which some analysts estimate will come in at a paltry 1% or less, will be the biggest factor, Gilani said, followed by the performance of 10-year Treasury bonds – unless the stock market declines significantly.
"If it does, the 'wealth-factor component' of their feel-good strategy will be a washout," Gilani said. "Then it's back to square one."
GDP numbers are to be released Wednesday and could play a role in the Fed's next move.
At the last FOMC meeting, participants agreed employment – which along with inflation is part of the Fed's "dual mandate" – had continued to improve.
"Many saw the cumulative decline in the unemployment rate and gains in nonfarm payrolls over the past nine months as considerable," according to the minutes.
And members generally agreed the "economy was expanding at a moderate pace," noting gains in consumer spending and an improved housing market.
Most participants at the June meeting expected real GDP growth to pick up in the second half of 2013.
Those who favored a reduction in bond purchases "soon" cited the decline in unemployment and ongoing increase in private payrolls.
But investors shouldn't take "soon" to mean this week.
IHS Global Insight economists Paul Edelstein and David Deull wrote, "In light of deflated growth expectations, we continue to expect the Fed to wait until early 2014 to slow its bond buying. But even if an earlier tapering is in the cards, it shouldn't be initiated at [the FOMC meeting]."
Read more from Money Morning on Your Best Strategy for Playing This QE Rally.