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Title: What Drives the FOMC's Dot Plots?

Author(s): Stefan Gerlach and Rebecca Stuart

Publication Date: August 2018

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

Programme Area(s): Monetary Economics and Fluctuations

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.

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Bibliographic Reference

Gerlach, S and Stuart, R. 2018. 'What Drives the FOMC's Dot Plots?'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=13117