Markets Await Fed Announcement

The consensus view heading into Thursday's key Fed announcement is that the central bank will launch a third round of quantitative easing, although the size of such a package is unclear. According to a Reuters poll, 60 percent of economists believe that another round of bond buying will be announced. There is also a belief in the market that the Fed could signal that a weak economy may warrant ultra-low interest rates for another three years.

"The market is firmly in the camp that the FOMC will deliver; it's just a question of how much," said Brad Bechtel, managing director at Faros Trading in Stamford, Connecticut.

Some market observers believe that the Fed will launch an open-ended program this time around compared to previous fixed dollar amounts attached to QE1 and QE2. Such a move would allow the Fed more flexibility depending on the path of the economy.

Last Friday's disappointing payroll number is seen as bolstering the case for more quantitative easing. "The latest report simply confirms what the Federal Reserve already knows about the state of employment and will only encourage it to further support the economy through wider use of its balance sheet," said Andrew Wilkinson, chief economist strategist at Miller Tabak in New York.