WASHINGTON (MarketWatch) â What the Federal Reserve chooses to do with its âdot plotâ will be the best gauge to mood of U.S. central bankers following the worst jobs report in more than five years.
The Fed will release the dot plot â which shows where each of the central bankâs 17 governors and regional bank presidents project interest ratesâ along with a policy statement and new economist forecasts at 2 p.m. Eastern on Wednesday. Fed Chairwoman Janet Yellen will follow up with a press conference at 2:30 p.m.
There is widespread agreement that the U.S. central bank will hold its federal funds target rate unchanged at between 0.25% and 0.5% after the meeting.
Since the Fedâs last meeting in April, many U.S. central bankers stressed that they were leaning toward backing a rate hike in June if the economy cooperated. But then the Labor Department reported that a disappointing 38,000 were created in May, raising fresh uncertainty about the health of the economy.
Fed Chairman Janet Yellen, who prior to the jobs report said that a rate hike was possible âin coming months,â didnât repeat the comment in a lengthy speech after the data was released.
Economists donât see much chance of a change in the Fedâs projection of two rate hikes for 2016. In March, nine Fed officials projected two rate hikes. And only a small group is expected to ratchet down to forecast one rate hike this year, said Michael Gregory, deputy chief economist at BMO Capital Markets.
Ellen Zentner, chief economist at Morgan Stanley, thinks the Fed will still project two rate hikes in 2016 but trim its forecast and project three rate hikes in both 2017 and 2018.
âYellen will tie the lower path of policy to persistent headwinds that resulted in longer-run forecast changes, [and] stress considerable uncertainty in the outlook,â Zentner said.
However, Joseph LaVorgna, chief U.S. economist at Deutsche Bank, said he thought the rate forecasts would remain unchanged in 2016 and 2017, âthereby allowing the Fed to retain the option to raise rates in the coming months should the incoming data warrant.â
The Fed is ânot throwing in the towel just yet,â LaVorgna said.
Scott Anderson, chief economist at the Bank of the West, said that if the Fed doesnât lower the amount of rate hikes in the out-years, âthe market could view this as quite hawkish.â
David Tulk, head of global macro strategy at TD Economics, said Fed officials will want to avoid the repeat of the March meeting where âthe market responded aggressively to a tone that was arguably too dovish.â
Reporters will press Yellen why she dropped the reference made on May 27 that a âhike in coming months may be appropriateâ that was dropped from her June 6th speech.