Jeanna Smialek at Bloomberg tweeted this photo of some cupcakes they have at the office in honour of today’s Fed meeting.
Do those patterns look familiar to you?
They should, if you’re paying attention to monetary policy.
These are the so-called dot plots. Every few Fed meetings, the various FOMC members are asked to make a forecast about the future path of short-term interest rates. Then the guesses are all put collectively on a chart that looks like this:
So you can see, that almost everyone expected rock-bottom rates at the end of 2014. By 2015 the picture is more mixed, as almost every FOMC member is predicting at least some kind of rate hike by the end of the year. And one of them even thinks that interest rates will be at 3% by the end of 2015. You don’t know which FOMC member is associated with each dot, but taken collectively, they offer a signal of how they think things will advance going forward.
Today we get new dot plots, and everyone will be watching.
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