Econ 442 “Macroeconomic Policy.” Someone raised a question today: Can people distinguish between the market's expectations and the Federal Reserve's expectations regarding the direction of the federal funds rate. In short, under certain assumptions, the answer is yes.
One can consider the median forecast in the Summary of Economic Projections (SEP) as a proxy for the Fed's view. Based on the December meeting, Bloomberg compiled this chart:
source: A. Bull, Bloomberg, December 13, 2023.
The green line is the path defined by the median FOMC response. The white line is the implied future federal funds rate inferred from futures data. The dot map information for the December 2023 meeting is here (page 4).At any given time, you can find the implied federal funds rate from futures CME Group Fed Watch Tool (I don’t know where I can get historical information for free).
Note that as of December, the market's implied path was below the FOMC's 2024 midpoint.
