DP13117 What Drives the FOMC's Dot Plots?

Author(s): Stefan Gerlach, Rebecca Stuart
Publication Date: August 2018
Keyword(s): Federal Reserve, interest rate expectations, interpolation, monetary policy
JEL(s): E52, E58
Programme Areas: Monetary Economics and Fluctuations
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=13117

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.