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What the Fed will do this week—and why it matters

The Federal Reserve releases its next policy statement on Wednesday. And with nervousness about the future of the federal funds rate mounting, investors will certainly be watching intently.

"The marketplace is going to dissect all the nuances and read very closely between the lines to look for further evidence as to how the Fed is going to implement a 'qualitative guidance' policy path," David Robin of Newedge wrote to CNBC.com.

In its March statement, the Fed moved from quantitative to qualitative guidance on the federal funds rate—the important rate at which banks lend to each other. At her post-statement press conference, Fed Chair Janet Yellen caused substantial nervousness when she said that the target on the rate could be raised six months after quantitative easing ends. Yet in later statements, she seemed to walk that back.

"She confused the market, and then she smoothed that out [and] sedated the market," said Jeff Kilburg of KKM Financial. "So the language is going to be key."

Read MoreBehind Janet Yellen's inflation dilemma

Federal Reserve Chair Janet Yellen addresses the 2014 National Interagency Community Reinvestment Conference on March 31, 2014 in Chicago.
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Federal Reserve Chair Janet Yellen addresses the 2014 National Interagency Community Reinvestment Conference on March 31, 2014 in Chicago.

Most expect the Fed to taper its monthly quantitative easing program by another $10 billion. And any changes in guidance could be mild.

"We expect policymakers to announce another $10 billion in tapering and to make only a few tweaks in their statement after having made a major overhaul last month," wrote Joseph LaVorgna, chief US economist at Deutsche Bank.

Still, any changes that are made could matter big time.

"The marketplace thrives on policy path clarity, but transparency has been replaced by confusion," Robin said. "Yellen doesn't seem to have the communication process under control, and hence the marketplace does not give her regime the benefit of the doubt. This statement could go a long way to solving that problem—or not"

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