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What Drives the FOMC’s Dot Plots?

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  • Gerlach, Stefan
  • Stuart, Rebecca

Abstract

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.

Suggested Citation

  • Gerlach, Stefan & Stuart, Rebecca, 2018. "What Drives the FOMC’s Dot Plots?," CEPR Discussion Papers 13117, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:13117
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    References listed on IDEAS

    as
    1. Gerlach, Stefan & Stuart, Rebecca, 2016. "Joining the Dots: The FOMC and the future path of policy rates," Research Technical Papers 08/RT/16, Central Bank of Ireland.
    2. Mankiw, N Gregory & Miron, Jeffrey A & Weil, David N, 1987. "The Adjustment of Expectations to a Change in Regime: A Study of the Founding of the Federal Reserve," American Economic Review, American Economic Association, vol. 77(3), pages 358-374, June.
    3. Svensson, L.E.O., 1994. "Estimating and Interpreting Foreward Interest Rates: Sweden 1992-1994," Papers 579, Stockholm - International Economic Studies.
    4. Gerlach, Stefan & Stuart, Rebecca, 2018. "Plotting interest rates: The FOMC’s projections and the economy," CEPR Discussion Papers 12768, C.E.P.R. Discussion Papers.
    5. Nelson, Charles R & Siegel, Andrew F, 1987. "Parsimonious Modeling of Yield Curves," The Journal of Business, University of Chicago Press, vol. 60(4), pages 473-489, October.
    6. Fernanda Nechio & Glenn D. Rudebusch, 2016. "Has the Fed Fallen behind the Curve This Year?," FRBSF Economic Letter, Federal Reserve Bank of San Francisco.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Federal Reserve; Monetary policy; Interest rate expectations; Interpolation;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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