Expect the Fed to have a more 'somber' outlook on the economy this week

The Federal Reserve kicks off its two-day monetary policy meeting on Tuesday and will announce its latest policy decision on Wednesday.

In its March policy statement, the Fed explicitly ruled out an interest rate hike in April, so little is expected from Wednesday's announcement, particularly since Fed chair Janet Yellen is not scheduled to speak to the press after the decision is released.

But the policy statement will give an updated view on how the Fed sees the current economic situation in the US, and after a first quarter that saw economic data widely disappoint, Bank of America Merrill Lynch's Michael Hanson expects the Fed's outlook will be a bit more downbeat this time around.

In a note to clients on Friday, Hanson wrote:

At the March FOMC meeting, the Fed took any policy changes in April off the table. We don't expect similar language about June policy at the April meeting. We do expect a more somber description of recent activity. This dovish shift in the nearterm view should translate into significantly lower odds of a June rate hike in our view. But any market participants who seek an explicit signal that June also is off the table are likely to be disappointed: the FOMC will want to maintain as much policy flexibility as possible. Fed officials also should stay optimistic about reaching their dual mandate objectives over time. The minutes, released in three weeks' time, are once again likely to be more informative about the state of the Fed debate.

It's a busy week for the economy, with the first read on Q1 GDP set for release on Wednesday and the employment cost index - which will give us a reading on how wage pressures are building in the economy - set for release on Thursday.

But don't forget about the Fed.