DP11618 Joining the dots: The FOMC and the future path of policy rates

Author(s): Stefan Gerlach, Rebecca Stuart
Publication Date: November 2016
Keyword(s): Federal Reserve, interest rate expectations, interpolation, monetary policy
JEL(s): E52, E58
Programme Areas: Monetary Economics and Fluctuations
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=11618

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.