Financial market effects of FOMC projections |
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| Institution: | 1. School of Business, Macau University of Science and Technology, Avenida Wai Long Taipa, Macau, China;2. School of Economics, Singapore Management University, 90 Stamford Road, Singapore 178903, Singapore;1. Department of Economics, Universidad del Pacífico, Sánchez Cerro 2050, Jesús María, Lima, Perú;2. Department of Economics, University of California, Santa Cruz, USA;1. University of Essex, United Kingdom;2. KOF Swiss Economic Institute, ETH Zürich, Switzerland;3. University of Glasgow, United Kingdom;4. National Research University Higher School of Economics, Russian Federation |
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| Abstract: | I examine the impact of the forecasts released by the Federal Open Market Committee (FOMC) in the Summary of Economic Projections over the period of April 2011 through March 2019. I find that changes in the median FOMC federal funds rate forecast did impact asset prices, but forecasts of output and inflation did not have any effect, which may be surprising based on the literature regarding the “Fed information effect” channel. Further, the dispersion in the federal funds rate forecast does not affect asset prices though it does impact the degree of uncertainty regarding future monetary policy. Finally, I find that most of forward guidance can be summarized through the change in the median federal funds rate forecast for the end of the following year. |
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| Keywords: | FOMC projections Forward guidance Asset prices Dot plots |
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