Where is the fed funds rate heading?

The chart above shows a median estimate for the future path of interest rates in the world’s largest economy based on policymakers’ June economic projections.

But beware: the shaded area shows the extent to which previous forecasts have failed to hit the mark. What we can say is that there is a 70 per cent probability that the Funds rate will be between 0 and 3.1-4 percent at the end of 2017 and between 0 and 4.1-4.2 percent at the end of 2018.

As Janet Yellen explains in her Jackson Hole speech: “The reason for the wide range is that the economy is frequently buffeted by shocks and thus rarely evolves as predicted.”

As former Fed policymaker Narayana Kocherlakota said on Twitter: “Don’t rely on FOMC forecasts of future fed funds rates”.


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