U.S. Federal Reserve Policy is crucial to the global markets and thus any instrument which helps us gain and insight into it garners a lot of attention from investors worldwide. One such instrument is the Dot PlotWhat: A Fed Dot-Plot shows the projections of the 16 members of the FOMC (Federal Open Market Committee), the rate setting body within the Fed. It is published after every Fed meeting. It represents each members projections about the level of the fed fund rates at the end of the calendar year. Apart from the absolute number of FOMC members’ projections, it is also important to note the direction of the movement. Investors are interested in knowing whether Fed plans to undertake a loose monetary policy by keeping the interest rates low, or a tighter monetary policy by raising the interest rates. These predictions are released by Fed in a chart wherein each dot represents a member at their target interest rate level for each time period.The dot plot released in december shows the interest rates at 2.125% at the end of 2018. The prediction for 2019 was unchanged at 2.688%. However, the 2020 projection has been raised to 3.1% from 2.9%While this is a major indicator, it is also important to keep in mind that the Fed adjusts its rates with respect to the ongoing economic trends, inflation and global scenarios. In case of unforeseen future events such as a sudden economic crisis, the members will change their projections. Therefore the long term projections carry a lesser weight than those closer to the near future.Another issue is that the FOMC membership is not permanent and is rotated among the various member banks. Another reason for change in the predictions. Since investors do not have the capacity to tell which dot belongs to which member, consequently they do not know how much weight to attach to a dot which is an outlier with the range for a certain period


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