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Figure 1. Federal Funds Rate Paths from the SEP

Percent
Period September 2016 December 2015 December 2014
2014: Y/E     0.125
2015: Y/E   0.375 1.125
2016: Y/E 0.625 1.375 2.500
2017: Y/E 1.125 2.375 3.625
2018: Y/E 1.875 3.250  
2019: Y/E 2.625    

Note: Based on median projections for year-ends.

Source: Summary of Economic Projections (SEP), December 2014, December 2015, and September 2016 (documents available on the Board's website at https://www.federalreserve.gov/monetarypolicy/fomccalendars.htm).

Figure 2. OIS-Implied Federal Funds Rate Paths

Percent
Period September 2016 December 2015 December 2014
2014:Q4     0.111
2015:Q1     0.124
2015:Q2     0.203
2015:Q3     0.340
2015:Q4   0.308 0.528
2016:Q1   0.386 0.751
2016:Q2   0.505 0.983
2016:Q3 0.419 0.644 1.202
2016:Q4 0.506 0.785 1.386
2017:Q1 0.583 0.917 1.539
2017:Q2 0.646 1.043 1.678
2017:Q3 0.686 1.161 1.804
2017:Q4 0.708 1.265 1.915
2018:Q1 0.724 1.359 2.012
2018:Q2 0.741 1.446 2.094
2018:Q3 0.768 1.528 2.160
2018:Q4 0.802 1.604 2.212
2019:Q1 0.838 1.677  
2019:Q2 0.874 1.747  
2019:Q3 0.910 1.814  
2019:Q4 0.947 1.880  
2020:Q1 0.983    
2020:Q2 1.018    
2020:Q3 1.053    

Note: Based on overnight index swap (OIS) quotes on the day before the release of the Summary of Economic Projections in December 2014, December 2015, and September 2016.

Source: Bloomberg; Federal Reserve Board staff calculations.

Figure 3. Federal Funds Rate Paths from the PD Survey

Percent
Period September 2016 December 2015 December 2014
2014:Q4     0.125
2015:Q1     0.125
2015:Q2     0.375
2015:Q3     0.625
2015:Q4   0.375 0.875
2016:Q1   0.625 1.125 *
2016:Q2   0.750 1.375
2016:Q3 0.375 0.875 1.75 *
2016:Q4 0.625 1.125 2.125
2017:Q1 0.625 1.375 2.25 *
2017:Q2 0.875 1.625 2.375
2017:Q3 0.875 1.875 2.75 *
2017:Q4 1.125 2.125 3.125
2018:Q1 1.125 2.375 * 3.25 *
2018:Q2 1.375 2.625 3.375
2018:Q3 1.5 * 2.75 *  
2018:Q4 1.625 2.875  
2019:Q1 1.75 *    
2019:Q2 1.875    
2019:Q3 2 *    
2019:Q4 2.125    

* Value interpolated from the data.  Return to table.

Note: Based on the median of the modal forecasts from the primary dealer (PD) surveys conducted before the December 2014, December 2015, and September 2016 meetings of the Federal Open Market Committee.

Source: Federal Reserve Bank of New York.

Figure 4. Longer-Run GDP Growth Projections from the SEP

Percent
Period Midpoint Upper Central Tendency Lower Central Tendency
January 2012 2.45 2.60 2.30
September 2013 2.35 2.50 2.20
September 2014 2.15 2.30 2.00
September 2015 2.00 2.20 1.80
September 2016 1.85 2.00 1.70

Note: The whisker bars show the central tendency, and the line shows the midpoint of the central tendency. GDP is gross domestic product.

Source: Summary of Economic Projections (SEP), January 2012, September 2013, September 2014, September 2015, and September 2016 (documents available on the Board's website at https://www.federalreserve.gov/monetarypolicy/fomccalendars.htm).

Figure 5. Longer-Run Federal Funds Rate Projections from the SEP

Percent
Period Median Upper Central Tendency Lower Central Tendency
January 2012 4.25 4.50 4.00
September 2013 4.00 4.10 3.80
September 2014 3.75 4.00 3.50
September 2015 3.50 3.75 3.25
September 2016 2.88 3.00 2.75

Note: The whisker bars show the central tendency, and the dot shows the median.

Source: Summary of Economic Projections (SEP), January 2012, September 2013, September 2014, September 2015, and September 2016 (documents available on the Board's website at https://www.federalreserve.gov/monetarypolicy/fomccalendars.htm).

Figure 6. Longer-Run Unemployment Rate Projections from the SEP

Percent
Period Midpoint Upper Central Tendency Lower Central Tendency
January 2012 5.60 6.00 5.20
September 2013 5.50 5.80 5.20
September 2014 5.35 5.50 5.20
September 2015 5.05 5.20 4.90
September 2016 4.85 5.00 4.70

Note: The whisker bars show the central tendency, and the line shows the midpoint of the central tendency.

Source: Summary of Economic Projections (SEP), January 2012, September 2013, September 2014, September 2015, and September 2016 (documents available on the Board's website at https://www.federalreserve.gov/monetarypolicy/fomccalendars.htm).

Figure 7. SEP Projected Federal Funds Rate: Taylor (1993)

Number of participants with projected midpoint of target range or target level

Midpoint of target range
or target level (Percent)		 2016 2017 2018
0.125      
0.250      
0.375 3    
0.500      
0.625 10 2 1
0.750      
0.875 3 1  
1.000      
1.125 1 7  
1.250      
1.375   1  
1.500      
1.625   2 2
1.750   1  
1.875   2 7
2.000      
2.125   1 1
2.250      
2.375      
2.500      
2.625     2
2.750     2
2.875     1
3.000      
3.125     1
  2016 2017 2018
Taylor rule using medians of SEP variables and 2% intercept 3.550 3.900 4.300
Taylor rule using medians of SEP variables and 0.9% intercept 2.450 2.800 3.200

Source: Summary of Economic Projections (SEP), September 2016 (document available on the Board's website at https://www.federalreserve.gov/monetarypolicy/fomccalendars.htm); John B. Taylor (1993), "Discretion versus Policy Rules in Practice," Carnegie-Rochester Conference Series on Public Policy, vol. 39 (December), pp. 195-214.

Figure 8. Estimation of Short-Run, Time-Varying $$ r^* $$

  • IS equation relates the unemployment gap to the lagged unemployment gap and the lagged real interest gap as follows:
    $$ (u_{t+1} - u^*_{t+1}) = \alpha \times (u_t - u^*_t) + \beta \times (r_t - r^*_t) $$
  • $$ \alpha=0.86 $$ and $$ \beta=0.14 $$
  • Use median values of the longer-run unemployment rate, the unemployment rate, and the real federal funds rate from the September 2016 Summary of Economic Projections to solve for the implied short-run, time-varying $$ r^* $$

Note: IS is investment and saving.

Source: Federal Reserve Board staff.

Figure 9. SEP Projected Federal Funds Rate: Taylor (1993)

Number of participants with projected midpoint of target range or target level

Midpoint of target range
or target level (Percent)		 2016 2017 2018
0.125      
0.250      
0.375 3    
0.500      
0.625 10 2 1
0.750      
0.875 3 1  
1.000      
1.125 1 7  
1.250      
1.375   1  
1.500      
1.625   2 2
1.750   1  
1.875   2 7
2.000      
2.125   1 1
2.250      
2.375      
2.500      
2.625     2
2.750     2
2.875     1
3.000      
3.125     1
  2016 2017 2018
Taylor rule using medians of SEP variables and 2% intercept 3.550 3.900 4.300
Taylor rule using medians of SEP variables and 0.9% intercept 2.450 2.800 3.200
Taylor rule using medians of SEP variables and $$ r^* $$ intercept 1.780 1.910 1.790

Note: $$ r^* $$ calculated as in figure 8.

Source: Summary of Economic Projections (SEP), September 2016 (document available on the Board's website at https://www.federalreserve.gov/monetarypolicy/fomccalendars.htm); John B. Taylor (1993), "Discretion versus Policy Rules in Practice," Carnegie-Rochester Conference Series on Public Policy, vol. 39 (December), pp. 195-214.

Figure 10. Median of Individual FOMC Participants' September 2016 Federal Funds Rate Projections

Percent
Period Midpoint of
Target Range		 Median of
projections		 Lower: Central
Tendency of
projections		 Upper: Central
Tendency of
projections		 Lower: 70%
Confidence
Interval		 Upper: 70%
Confidence
Interval
2011: Y/E 0.130          
2012: Y/E 0.130          
2013: Y/E 0.130          
2014: Y/E 0.130          
2015: Y/E 0.380          
2016: Y/E   0.600 0.600 0.900 0.125 1.130
2017: Y/E   1.100 1.100 1.800 0.125 2.655
2018: Y/E   1.900 1.900 2.800 0.125 4.294
2019: Y/E   2.600 2.400 3.000 0.125 5.244

Note: Confidence interval equals the median of the end-of-year federal funds rate paths projected by individual Federal Open Market Committee (FOMC) participants, plus or minus the average root mean squared prediction error for 3 years ahead made by private and government forecasters over the past 20 years, subject to an effective lower bound of 12.5 basis points.

Source: Summary of Economic Projections, September 2016 (document available on the Board's website at https://www.federalreserve.gov/monetarypolicy/fomccalendars.htm); Federal Reserve Board staff.

Last Update: November 30, 2016