High Inflation Broke the Fed Consensus

One of the things that went largely unnoticed about yesterday’s Federal Open Market Committee (FOMC) is how little consensus there is about the median term future.

Fed officials are in very close agreement about the path of the Federal Funds rate this year and next year, according to the dot plot of the Summary of Economic Projections (SEP). Eight of the FOMC participants see the target range between four and 4.25 percent, and nine see the range at 4.25 to 4.50 percent. One outlier sees it a quarter point higher, and one sees it a quarter point lower.

There are three levels that get a lot of support for the end of 2023 projection. There are six FOMC participants who foresee a range of 4.25 to 4.50 percent, six who see 4.50 to 4.75, and six who see 4.75 to 5.00 percent. One outlier sees the target range between 3.75 and four percent. The point is that the Fed’s projections are pretty tightly clustered around three positions that are themselves close to one another.


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