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Plotting interest rates: The FOMC's projections and the economy

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  • Gerlach, Stefan
  • Stuart, Rebecca

Abstract

The FOMC's “dot plots” contain members’ views regarding what federal funds rate will be necessary in the end of this and the coming years for the FOMC to achieve its statutory objectives. The dots can be interpreted as instantaneous forward rates. We fit a curve, which is characterised by four parameters, through them and study how it moves with the economy. We find that the level of the federal funds rate the month before the FOMC meeting, the unemployment rate and (updated) estimates by Laubach and Williams (2003) of the natural real interest rate shape the curves.

Suggested Citation

  • Gerlach, Stefan & Stuart, Rebecca, 2019. "Plotting interest rates: The FOMC's projections and the economy," Journal of Macroeconomics, Elsevier, vol. 60(C), pages 198-211.
    • Handle: RePEc:eee:jmacro:v:60:y:2019:i:c:p:198-211
    DOI: 10.1016/j.jmacro.2019.03.001
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    Cited by:

    1. Gerlach, Stefan & Stuart, Rebecca, 2020. "What drives the FOMC’s dot plots?," Journal of International Money and Finance, Elsevier, vol. 104(C).

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    More about this item

    Keywords

    Federal Reserve; Monetary policy; Interest rate expectations;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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