FED'S BOND PURCHASES
— Investors: The Fed said in December that it would start paring its monthly bond purchases in light of steady economic gains. The purchases have been intended to keep loan rates low to spur spending and growth. The Fed's pullback has unnerved some, who note the anxiety it's sparked in overseas markets. They also wonder if the Fed should delay any further cutbacks in its bond purchases until hiring accelerates. Will the Fed reduce its stimulus throughout 2014 even if the economy falters? Investors want to know that the Fed's pullback isn't on automatic pilot.
— Yellen: She'll likely provide such assurance. Expect her to invoke language the Fed has stressed: That its reductions in bond purchases are "not on a preset course" and depend on how the economy and job market fare. On the other hand, Yellen won't likely dampen expectations that the Fed will keep trimming its purchases if the economy improves. She'll want to signal flexibility without raising false hope that the bond purchases, which have boosted stock prices, will continue indefinitely.
— Investors: Financial markets would like Yellen to stress explicitly that the Fed won't start raising its benchmark short-term rate any time soon. That rate has been near zero for five years.
— Yellen: She'll likely give investors the message they want. The Fed has said it expects to keep short-term rates at record lows "well past" the time unemployment falls below 6.5 percent. The rate is now 6.6 percent. Yellen could note that fact and explain that the Fed won't rely solely on the unemployment rate to determine when to start raising interest rates. The unemployment rate has dropped in part because many people without jobs have stopped looking for work and are no longer counted as unemployed.