Plotting Interest Rates: The FOMC's Projections and the Economy
35 Pages Posted: 6 Mar 2018
Date Written: March 2018
The FOMC's "dot plots" contain members' views regarding what federal funds rate will be necessary in the end of this and the coming years for the FOMC to achieve its statutory objectives. The dots can be interpreted as instantaneous forward rates. We fit a curve, which is characterised by four parameters, through them and study how it moves with the economy. We find that the level of the federal funds rate the month before the FOMC meeting, the unemployment rate and (updated) estimates by Laubach and Williams (2003) of the natural real interest rate shape the curves.
Keywords: Federal Reserve, interest rate expectations, monetary policy
JEL Classification: E52, E58
Suggested Citation: Suggested Citation