(Bloomberg) -- Federal Reserve policy makers haveanother reason to delay an interest-rate increase after a weakMarch payrolls report corroborated a first-quarter slowdown in theU.S. economy. The question is whether that’s reason enough.

Employers last month added the fewest jobs since December 2013,creating just 126,000 positions, the LaborDepartment said Friday. Revisions erased 69,000 jobs frompreviously reported tallies for January and February. The weakerdata contrast with 12 straight months of 200,000-plus monthlygains.

The Fed is watching for the economy to reach or approach fullemployment and generate higher inflation before raising interestrates from near zero. Fed Chair Janet Yellen and her colleagueslast month opened the door to an increase as soon as June whilealso suggesting in forecasts that September may be a more likelytime to begin tightening.

“This single report will not necessarily result in the Fedchanging tack on its view of policy tightening this year,” MillanMulraine, a research strategist at TD Securities USA LLC in NewYork, wrote in a note after the report. “What it will do is weakenthe argument for a mid-year hike and it will place a greaterpremium on the next few employment reports as the Fed looks forevidence that the relapse in economic growth and labor marketmomentum is temporary.”

Mulraine maintained his projection for an increase in September,though he said the “balance of risks” is shifting to a laterstart.

Policy makers will get two more employment reports before theirJune 16-17 meeting, when they will also release new economic andinterest-rate forecasts.

Fed Projections

Fed officials in March lowered their median estimate for themain rate at the end of 2015 to 0.625 percent, compared with 1.125percent in December forecasts. The median estimate for the end of2016 declined to 1.875 percent from 2.5 percent, according to theFederal Open Market Committee’s quarterly Summary of EconomicProjections.

Because it’s difficult to tell how Fed officials will react to asingle month of weak jobs data, this report makes it even harder toproject the central bank’s next move, Jim Baird, partner and chiefinvestment officer for Plante Moran Financial Advisors inSouthfield, Michigan, wrote in a note following the report.

“This data does more to muddy the waters of expectations thanprovide clarity around policy makers’ next steps,” he wrote.

The odds of a June liftoff implied by federalfunds futures fell to 14 percent after the report from 18 percentThursday. The implied probability of a September rate rise alsoslumped after the release, dropping to 35 percent from 39percent.

Options on eurodollar futures as of 10:30 a.m. New York timeimply traders see only a 47 percent chance the Fed will raise ratesthis year and just a 55 percent chance of an increase by March2016.

Yellen’s Caution

Federal Reserve Chair Janet Yellen said last week interest rateswill probably be raised in 2015 and made the case for a cautiousapproach to subsequent increases. Speaking in San Francisco, Yellencited strong gains in the labor market as a sign that restraints onthe economy are abating.

Today’s payrolls report “will give the Fed less confidence thatthe economy is ready to endure the policy liftoff as early asJune,” Bloomberg economist Carl Riccadonna and his colleagues wroteafter the release. “It will bring into question the degree to whichthe economy will spring back in the current quarter.”

The worse-than-expected number fits into a string of soft firstquarter data, said Robert Brusca, president of Fact & OpinionEconomics in New York. It could cause Fed officials to back awayfrom statements suggesting that a rate increase is coming soon.

“I don’t understand how, with the economy this weak, the Fed caneven talk about raising interest rates,” Brusca said.

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