Joining the Dots: The FOMC and the Future Path of Policy Rates

30 Pages Posted: 14 Nov 2016

See all articles by Stefan Gerlach

Stefan Gerlach

Central Bank of Ireland; Centre for Economic Policy Research (CEPR)

Rebecca Stuart

Central Bank of Ireland

Date Written: November 2016

Abstract

The Federal Reserve publishes since 2012 Federal Open Market Committee (FOMC) members' views regarding what federal funds rate will be necessary for the FOMC to achieve its statutory targets. The views or 'projections' pertain to the end of the current and the next two or three years, and the 'longer run'. We use a simple model to interpolate the projections between these discrete points in time, estimate the interest rates one, two and three years ahead, and study how they evolve with macroeconomic conditions. News regarding the labour market, but not inflation, affects the projections in the sample period.

Keywords: Federal Reserve, interest rate expectations, interpolation, monetary policy

JEL Classification: E52, E58

Suggested Citation

Gerlach, Stefan and Stuart, Rebecca, Joining the Dots: The FOMC and the Future Path of Policy Rates (November 2016). Available at SSRN: https://ssrn.com/abstract=2869072

Stefan Gerlach (Contact Author)

Central Bank of Ireland ( email )

P.O. Box 559
Dame Street
Dublin, 2
Ireland

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Rebecca Stuart

Central Bank of Ireland ( email )

P.O. Box 559
Dame Street
Dublin, 2
Ireland

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