The worst phase of the pandemic crisis in the US may be easing, but economic projections for the immediate future remain grim. Recent estimates for the upcoming second-quarter report for GDP tell the story—a tsunami of deeply negative projections. Amid the macro darkness, the Federal Reserve today, as part of a monetary statement, is scheduled to release its own set of revised economic projections.

Meantime, the median Q2 nowcast compiled by CapitalSpecator.com from several sources continues to anticipate a dramatically negative outlook for US economic output: a 31.6% decline in real (inflation-adjusted) annualized terms. By that standard, the drop will be the biggest quarterly loss in the post-World War Two era by a wide margin when the Bureau of Economic Analysis publishes its initial estimate on July 30.

The Federal Reserve today will release its own set of updated economic expectations, which will be widely read as financial markets look for additional context. The new data will be the first time the central bank has outlined its macro outlook since last December, when relatively upbeat numbers on economic growth were presented. (The scheduled quarterly update for projections in March was scrapped as the pandemic forced an economic shutdown.)

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Suffice to say, a lot has changed in the last six months as the coronavirus crisis has derailed economies around the world. Although it’s clear that the US economy is suffering, today’s Fed estimates will be keenly read for clues on what the central bank is expecting for the path of a rebound and how that may influence monetary policy in months ahead.

“The Fed likely forecasts a strong rebound in growth in H2, but the level of GDP will remain well below the pre-coronavirus level until late 2021,” predicts Kathy Bostjancic at Oxford Economics.

“People are very anxious to see what the policy projections look like,” notes Stephen Stanley, chief economist at Amherst Pierpont Securities. Fed Chairman Powell “is likely to stress this isn’t any kind of ironclad commitment. We’re very foggy on how things are going to play out.”

Although the Fed is widely expected to leave interest rates unchanged at the current zero-to-0.25% target rate today and for the foreseeable future, the main question for monetary policy is when the central bank begins to pull back on its ultra-easy policy?

Complicating the outlook is last week’s surprisingly strong jobs report. The Dept. of Labor announced that the US nonfarm payrolls rose 2.5 million in May after a record drop of more than 20 million in April. The gain in May surprised nearly every economist by a huge margin. A key issue for today’s Fed meeting: Does the strong rebound in jobs for May impact monetary policy?

Much depends on whether the Fed sees the May bounce as an anomaly or the start of a rebound that will continue in the months ahead. Meantime, there are key questions awaiting.

“How quickly does unemployment get back to 5%? Is this a few months, quarters or is this a few years? And the monetary response is very different to each of those,” says Jon Hill, senior fixed income strategist at BMO. “They’ve been very clear about the uncertainty. The word uncertainty showed up 21 times in the Beige Book. Last Friday, they had a 10 million surprise in nonfarm payrolls [difference between 8 million loss via the consensus forecast and 2.5 million gain]. How do they forecast that?

Perhaps Fed Chairman Jerome Powell will enlighten markets at today’s press conference, scheduled for 2:30 p.m. eastern, which follows the release of the Fed’s FOMC policy announcement and economic projections at 2:00 p.m. eastern.

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