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Fed's rate-hike guidance

Thursday, December 18, 2014 - 14:33

The US Federal Reserve's policymaking body has just issued its last statement for the year. So what lies ahead in 2015?

There are two charts in the press conference materials that tell you pretty much what the Fed governors are thinking about rate hikes - the "Appropriate timing of policy firming" and "Appropriate pace of policy firming" charts. The second one is also known popularly as "The Dot Chart". You could skip every other part of the statement and the briefing, go straight to these two charts, and you'll probably come out OK.

There's a certain elegance to the Dot Chart. One look at it and you get a sense of the distribution of views within the Federal Open Market Committee. It's also useful to compare the latest Dot Chart against the previous one to see how views have changed. I did that, and the result is below. I turned the usual dot chart on its side because of space constraints in the blog, but you can still see that median targets for interest rates in 2015 and 2016 have come down, probably amid concerns about the pace of economic growth in the United States.