Fed decision day guide: From patience to reasonable confidence

Here's what to look for when the Federal Open Market Committee releases its policy statement along with quarterly economic projections at 2 p.m. Wednesday in Washington, and Federal Reserve Chair Janet Yellen holds a news conference at 2:30:

Guidance change. The Federal Reserve is likely to remove an assurance from the statement that it will be "patient" before beginning to raise interest rates, opening the door to a rate rise as early as June.

Sixty-nine percent of the 49 economists polled by Bloomberg News thought the phrase would be replaced by some other form of guidance, and 20 percent said it would be cut and nothing would be put in its place.

If officials replace patient with something else, they could use data-dependent language on the need for "reasonable confidence" that inflation would rise toward their 2 percent goal before lifting rates, said Neil Dutta, head of U.S. economics at Renaissance Macro Research L.L.C. in New York.

Updated interest-rate projections. Fed officials' new quarterly forecasts will show they expect the benchmark interest rate to rise more slowly, said Roberto Perli, a former associate director of the Fed's Division of Monetary Affairs.

Perli, now a partner at Cornerstone Macro L.L.C. in Washington, said the median projection for the benchmark federal funds rate at the end of 2015 will probably fall to between 0.75 percent and 1 percent. The median in December was 1.125 percent.

Dollar strength. Yellen can expect questions about how dollar appreciation will affect the outlook for monetary policy, according to Terry Sheehan, an economic analyst at Stone & McCarthy Research Associates in Princeton.

"So far Yellen has kind of downplayed things like the impact of the stronger dollar, or the disinflationary trends in some of the larger economies and some of the disruptions that we could see from them," Sheehan said. The Bloomberg Dollar Spot Index, which tracks the greenback against 10 major currencies, has risen 20 percent since a year ago.

Inflation confidence. Strong jobs data since January have probably increased the "reasonable confidence" of at least some Fed officials that inflation will move back up to its 2 percent target, said Jim O'Sullivan, chief U.S. economist at High Frequency Economics in Valhalla, N.Y.

Unemployment in February fell to 5.5 percent, the lowest since May 2008. On the other hand, amid falling energy prices and the stronger dollar, the Fed's preferred gauge of price pressures slowed to a 0.2 percent gain in January and has been below 2 percent since April 2012.