Discussion Paper Details

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Title: Joining the dots: The FOMC and the future path of policy rates

Author(s): Stefan Gerlach and Rebecca Stuart

Publication Date: November 2016

Keyword(s): Federal Reserve, interest rate expectations, interpolation and monetary policy

Programme Area(s): Monetary Economics and Fluctuations

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.

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Bibliographic Reference

Gerlach, S and Stuart, R. 2016. 'Joining the dots: The FOMC and the future path of policy rates'. London, Centre for Economic Policy Research.