After weeks of speculation stoked by big job growth in the US reported earlier this month, the big day has finally arrived. The main event of the day for traders is the FOMC decision, statement, projections and press conference scheduled for this afternoon. Chatter among traders has been focused on whether the Fed will remove the word “patient” from its statement which FOMC Chair Yellen has confirmed as code for no interest rate increases for at least two meetings. Minutes from the last FOMC meeting also indicated that Fed members were leaning toward changing their guidance before liftoff on interest rates. USD has been climbing for quite some time and took another run higher this month on anticipation that the Fed would remove the word patient from its guidance and shift to a meeting by meeting approach to interest rate liftoff. Changing guidance today would open the door to rate hikes starting as soon as the June meeting. This may already be priced in to USD and US stocks which have been in retreat again this morning, so the biggest surprise would be if patient is left in which could send USD lower and US stocks higher. Just as important as the statement today will be the member projections, particularly the expectations for where the Fed funds rate could be at the end of this year. Fed funds projections from the December FOMC meeting show that there were three main factions within the Fed, a core group of 9 members looking for 0.75%-1 25% by the end of 2015, a hawkish group of 6 members looking for 1.50-2.00% and two lonely doves looking for no change. This time around traders will be looking to see if there are any changes to this profile, does the average move up or down and do we get a bigger convergence toward the centre? If the Fed is looking for a 1.00% rate by the end of this year, two of the main approaches to getting there are a 0.25% every other meeting starting in June, or 0.25% every meeting starting in September. The start date may depend on the data we get over the next couple of months, but a number of FOMC members have suggested they favour a gradual approach. The Fed has a dual mandate to support employment and keep inflation under control. Employment has been growing in leaps and bounds so the time for normalization on that side has arrived. The inflation side is a bit more dicey. The oil price crash has been dragging on headline inflation numbers around the world, so it would seem deflation is a bigger issue, but traders should remember that central banks focus on core inflation which ignores the short term impact of energy price swings. One thing the Fed needs to be wary of is falling behind the curve and creating asset bubbles that end up creating even more problems. Three times in the last few decades the Fed left interest rates low after oil fell off a cliff, sparking huge stock market rallies and ending in painful unwindings. 1) After oil prices fell at the end of 1985, stocks soared in 1986 but the Fed didn’t start raising rates until 1987 coinciding with the Crash of ’87. 2) After oil prices fell in late 1998, the Fed cut rates in 1999 to boost liquidity for Y2K sending stocks soaring. The subsequent delayed move to raise rates back up culminated in the tech wreck and 2000-2002 bear market 3) After oil prices fell in 2003, the Fed didn’t start raising rates until 2004, by then the housing bubble was well on its way which ended in the 2008 financial crisis and the 2007-2009 bear market. Based on this history, it appears the Fed may want to try getting ahead of the curve this time around and give itself some flexibility for the future. . It’s also a big day for UK trading with employment numbers, Bank of England minutes and the UK federal budget. The government raised its GDP growth forecast for 2015 to 2.5% from 2.4% and for 2016 to 2.3% from 2.2%. The FTSE has been trading higher and GBP lower on anticipation of a budget with lots of goodies ahead of the May election. In the last few minutes, SEK has been slammed after the Riksbank announced a surprise 0.15% interest rate cut to (0.25%) and plans to buy SEK30 billion in government bonds, joining the QE camp. It also indicated it plans to keep interest rates at that level or lower though at least the second half of 2016, that it can do more if needed including possible intervention in forex markets. Corporate News FedEx $2.01 vs street $1.88, narrows May 2015 year guidance to $8.80 to $8.95 from $8.50 to $9.00 Oracle $0.68 as expected, 25% dividend increase Adobe Systems $0.44 vs street $0.39 Economic News Economic reports released overnight and this morning include: Sweden interest rate surprise 0.15% cut to (0.25%) SEK 30B QE program UK jobless claims (31K) vs street (30K) UK unemployment rate 5.7% vs street 5.6% UK average weekly earnings 1.8% vs street 2.2% UK 3M employment change 143K vs street 130K vs previous 103K UK Bank of England minutes 9-0 in favour of maintaining interest rates and QE UK federal budget Economic reports due later today include: 10:30 am EDT US crude oil inventories street 4.4 mmbbls 2:00 pm EDT US FOMC monetary policy decision 2:00 pm EDT US FOMC member projections 2:30 pm EDT US Fed Chair Yellen press conference 5:45 pm EDT NZ Q4 GDP street 3.4%