After the shock in jobs numbers on Friday all eyes will be on Yellen today at 12:30 est. as she will provide more clues to the Fed assessment of the recent drop in jobs numbers. What she says will be particularly insightful into the way the Fed will treat the data over the coming months regardless of whether there is a rate hike in July or not.
Should the Fed stick to their prior comments that one data point doesn’t signify a trend, it will mark the Fed as more committed to the longer term trend in low unemployment and rising wages being a precursor to inflation. By getting ahead of the trend they will be able to keep the inflation rate from getting out of hand while normalizing the interest rate curve. This will allow for cyclical rate increases/decreases to start to take shape.
The other side of the equation is that the Fed has been looking for an excuse, which would fit within its mandate, to not raise rates. This would make the case that the Fed is concerned about global growth and the spillover effects it may have on the US economy. If this happens I would assume that the Fed will seek to delay any real rise in rates until later in the year and look for inflation to hit the 2% target, or even over, before feeling confident in starting a normal rate hiking cycle.