Fed says worst is over, hikes coming

This week, Federal Reserve Chair Janet Yellen and her colleagues have an opportunity to clarify where they stand on the outlook for interest rates. The message will probably be that plans for additional tightening have been postponed, but not for long.

Fed officials are expected to reduce the number of rate hikes they see in 2016 and leave the target range for the federal funds rate unchanged at 0.25 percent to 0.5 percent after a two-day gathering of the Federal Open Market Committee in Washington.

Here’s what to look for when the FOMC releases its post-meeting statement and updated forecasts at 2 p.m. Wednesday, and in Yellen’s 2:30 p.m. press conference:

Fed policy makers will unveil new projections for the appropriate pace of rate increases for the first time since they voted to raise rates in December. Jonathan Wright, an economics professor at Johns Hopkins University in Baltimore, said the so-called “dot plot” will probably show a median forecast for only three increases this year, down from four in December.

Three months ago, market participants doubted that forecast: Futures contracts linked to the fed funds rate implied only two rate increases in 2016. Now, those contracts imply just one is more likely.

Read more: Bloomberg

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