The Fed: Three things market participants should watch for at the Fed interest-rate meeting

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Federal Reserve Board Chairman Jerome Powell speaks during a news conference after the attending the Board?s two-day meeting in July.

Federal Reserve officials have signaled that they intend to hold interest rates steady at its current 1.5%-2% range at the conclusion of this week’s policy meeting, and a surprisingly strong jobs report last week likely cemented this expectation.

However, despite expectations that policy makers will stand pat on rates, economists are wondering whether hints about future policy may be gleaned Wednesday from the statement, updated economic forecasts and a subsequent Q&A with reporters hosted by Fed Chairman Jerome Powell.

Read: Fed super-glued to its seat until after election

The S&P 500 index SPX, -0.32%  and the Dow Jones Industrial Average DJIA, -0.38%  were both headed lower as investors awaited the central bank’s update to policy.

Here’s what economists say to watch for in the Fed’s public statement, set to be released at 2 p.m. Eastern Time, and Powell’s remarks, due a half-hour later.

1. Will the Fed’s projection for interest rates change in 2020? Michael Feroli, economist at JPMorgan Chase, says he thinks the Fed’s so-called dot-plot — a chart depicting Fed members’ individual expectations for interest rates in the future — will signal no interest-rate changes in 2020.

“While there will likely still be some dots looking for a hike or two next year, we suspect a large number of the FOMC will be comfortable projecting no change for policy rates in the year ahead,” Feroli said, referring to the rate-setting Federal Open Market Committee, or FOMC.

The median path for the benchmark fed-funds rate will tilt higher, but only gradually, he said. Feroli looks for the median dot to sit at 2.125% at the end of 2022. That keeps rate-policy at a level that is “accommodative” or supporting growth over the forecast horizon.

2. How much unity is there among Fed officials? In September, the Fed’s dot-plot showed a “striking lack of consensus,” with views more widely dispersed than at any time since 2015, said Richard Moody, chief economist at Regions Financial Corp.

“It will be interesting to see if anything has changed in the past three months,” Moody said.

There should be unity of the surface. There aren’t expected to be any dissents to the formal vote to hold rates steady, a break from the more contentious decisions in July, September and October to ease policy.

3. Will the Fed eat humble pie? Fed officials should cut their estimate for how low the unemployment rate can go without sparking inflation, said Diane Swonk, chief economist at Grant Thornton. The Fed has estimated that it can’t let the unemployment rate fall below 4.2% without risking inflation. But the unemployment rate has been below 4.2% for two years. The Fed might also lower what they consider the “neutral” fed-funds rate, that neither stimulates nor restrains growth, from 2.5%. “The economy has been able to operate at a much lower unemployment rate and lower short-term interest rates than anyone ever imagined possible without generating inflation. It is time for the Fed eat humble pie and acknowledge that,” Swonk said.