What Drives the FOMC's Dot Plots?
34 Pages Posted: 21 Aug 2018
Date Written: August 2018
The Federal Open Market Committee (FOMC) releases quarterly its members' views about what federal funds rate will be appropriate at the end of the current and the next two or three years, and in the "longer run." We construct constant horizon interest rate projections one, two and three years ahead and use real-time data on 32 variables to study how these variables impact on the FOMC's interest-rate setting. News regarding the labour market is particularly important. At the shortest horizon, prices and financial market news is also significant; at longer horizons, household's financial situation also matters.
Keywords: Federal Reserve, interest rate expectations, interpolation, monetary policy
JEL Classification: E52, E58
Suggested Citation: Suggested Citation