Fed intentions unclear as dots move away from economic forecasts
There was something odd in the projections that Federal Reserve officials issued last week. Enough policy makers bumped up the number of interest-rate hikes they expected in 2017 to lift the median to three from two — displayed graphically in the Fed’s so-called "dot plot". The December 14 surprise, accompanying the Fed’s decision to raise rates for the first time in a year, pushed stocks off their record highs and lifted bond yields and the dollar. But the accompanying economic forecasts barely budged. Compared to their September outlook, the median estimate for growth next year edged up by just one-tenth of a percentage point to 2.1%, the expected unemployment rate at the end of 2017 dropped a tenth to 4.5% and the inflation call remained unchanged at 1.9%. "The overall picture is quite inconsistent," said Thomas Costerg, senior US economist at Standard Chartered Bank in New York. "It tends to undermine those dots. What is the message you are trying to convey?" The dissonance cont...
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