The Federal Reserve’s interest rate decision is notable for two reasons.
One is that the Fed has scrapped “Evan’s Rule” which had stated that the Fed might think about rate hikes once unemployment hits 6.5%. Now the Fed is being more vague about when it will hike rates.
The other big, notable fact is that more members of the FOMC see rate hikes sooner than they did last year.
This change is represented in the following two charts.
The first one shows the predicted path of the Fed Funds rate. Each dot represents where an FOMC member sees the Fed Funds rate at the end of each year. The second chart shows the same thing, except it’s from the December meeting. The key thing to look at is the 2015 dots. More people now think there will be a rate hike in 2015 than at the previous meeting..
So because more people anticipate a rate hike in 2015, that’s being seen as tightening.
But at her press conference, Janet Yellen says not to pay close attention. Specifically she says people “should not look at the dot plot as the primary way in which the Committee is speaking to the public at large.”
Later she said: “These dots are going to move up or down over time” implying that there’s going to be a lot of fluctuation.
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