Investors await Fed meeting

NEW YORK — The stock market doesn’t want any surprises from this week’s Federal Reserve’s meeting.

It is widely expected that the Fed will keep the fed funds rate, its key lending rate, at a historic low near zero when it meets Tuesday. That means investors and analysts will again pore over the economic assessment statement the Fed releases. They’ll be looking for changes to the Fed’s wording and its members’ voting patterns to get a sense of when rates might go up.

“It’s a nonevent,” said Paul Wachtel, a professor of economics at New York University’s Stern School of Business, of expectations for the Fed’s rate decision. “If they change the comments, it has a bigger impact.”

Investors are well aware that the Fed will eventually have to hike interest rates.

The economy will get to a point where it is strong enough to grow, and higher inflation is usually a natural result of expanding economic activity.

The market has already factored in a rate hike as they sent stock prices higher the past few weeks.

Still, while they’re prepared for rates to go up at some point, investors are likely to react badly in the short term to any indications that a rate hike is in the offing.

So, “the tone of the minutes are being microanalyzed” by investors, said Randy Bateman, chief investment officer at Huntington Asset Advisors.

The Fed has kept the language of its statements essentially unchanged for months. For example, the Fed has said over and over that:

n Inflation is likely to be “subdued for some time;”

n Economic conditions “are likely to warrant exceptionally low levels of federal funds rate for an extended period;”

n Economic activity has “picked up” or strengthened.

Analysts say the repetitive language is not an accident. The Fed doesn’t want to upset a nascent economic recovery.

Chairman Ben Bernanke and other Fed governors know that any changes that could cast doubt onto what he Fed might do in the near future could disrupt the market and/or upend a recovery.

Analysts believe it will likely take several months of solid, significant economic growth before the Fed starts to tinker with the language of its statement or interest rates.