Friday, September 18, 2015

The Fed's Forecast

The Federal Reserve kept short-term interest rates pinned near zero Thursday, but they also hinted once again at when exactly they might be raised. The answer to that question is: More slowly than many economists had previously anticipated.

Along with the Fed's economic projections, they also released a dot plot that shows the median and average projection of rates among Fed participants. Each dot represents an individual Fed official’s view, with 17 dots in total plotted for each year, so we can see what the aggregate forecast is.

The average level that Fed officials see rates ending 2015, 2016 and 2017 at are 0.4 percent, 1.5 percent and 2.6 percent, respectively. In June, when they released a similar graph, those figures were slightly higher, at 0.6 percent, 1.8 percent and 3 percent. Even into 2018, the average target was just 3.3 percent.

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