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Lets talk about the upcoming 1st meeting of the #FED #FOMC (28-29 January 2020). Specifically, lets talk about the #DOTS...
The #FED #FOMC developed the so called #DotPlot in 2011 as a chart to record each FED's official forecast for the FED's key short-term interest rate (federal funds rate - #FFR). Currently, the FFR, following the December 2019 meeting is in the target range between 1.5% and 1.75%
The most recent #DotPlot is attached below. Each dot represents one #FED official, from the Chairman to fellow Governors. It is anonymous & as such, no one knows which official is responsible for what dot...
Considering the #DotPlot above, each dot will reflect what each FED #FOMC member sees as the appropriate midpoint of the #FFR at the end of each calendar year. The dots are also plotted three years into the future as well as in the long-run...
Reading the #dotplot is fairly easy. The dots are plotted on an x/y plane. The y axis graph the #FFR, the x axis graph the year forecast...The dot plot should be seen as a means of #CentralBank #Policy #Communication. For #economic agents, it can prove to be highly useful...
For #Consumers, #Borrowers, #Investors, #Creditors it signals the likely rate path of short-term rates as seen by the #FED. As such, how much you can expect in loan repayments, interest on deposits etc...
The #FED #DotPlot can also convey a sense of where, on #businesscycle, the FED sees the US #economy & what kind of policy action will most likely be warranted from the #FED. Will it be a tighter, looser or neutral stance? All of these possibilities can be gleaned from the dots...
It must be said however that, although the #FED #DotPlot can prove informative in as far as gauging the likely path of #US #CentralBank #Policy, it should always be internalised with consideration that it is not an end in & of itself. It has to be complemented with real time data
In closing, we opened this thread by indicating that the #FED #FOMC will meet for the 1st time in 2020 on the 28th to 29th January. From the most recent #DotPlot, what do you think Chair #Powell & his team will do? Will they ease or normalise (hike back to neutral)? You tell me
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