The Latest Fed Dot Plot Projections
HSBC Global Research analyst Kevin Logan recently previewed this week’s FOMC meeting. In his report, Logan discussed HSBC’s expectations for the Federal Reserve and outlined what concerned investors should be watching for this week.
Latest Fed Dot Plot Projections
The most recent dot plot projections from the Fed in March indicates a median expected federal funds rate of around 0.5 percent by the end of 2015, around 2.0 percent by the end of 2016, upwards of 3.0 percent by the end of 2017, and a longer-term rate of around 3.75 percent.
Each red dot on the plot represents the projection of a single FOMC member.
One important thing to note in the dot plot is the relatively large range of projections by Fed members for year-end 2016 rates. Investors can likely expect that range to shrink over time as economic clarity leads Fed members to approach more of a consensus outlook.
HSBC is not expecting that the FOMC will change its current 0.0 to 0.25 percent federal funds rate target this week. However, Logan notes that any unexpected changes to the FOMC’s projections could have a significant impact on global markets.
“We recently cut our 2015 US GDP growth forecast to 2.2% from 2.5% on expectations of weaker net exports, do not expect the Fed’s first rate increase until December, and project a slower pace of rate hikes,” Logan explains.
What To Watch For
As far as this week’s meeting goes, the market has plenty to watch for from the Fed. HSBC expects that the Fed could lower its 2015 GDP forecast by about 0.4 percent this week and could also lower its long-term employment rate projections as well.
HSBC will also be watching for commentary from Janet Yellen on the potential impact of weak global GDP numbers and the strong U.S. dollar on U.S. monetary policy.
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