The Fed Remains Dovish

| Multi-Asset

The Fed Remains Dovish_chart website

Source: Unigestion, US Federal Reserve, as of 25 June 2021.

Despite the change in dot projections in the June meeting, the Fed’s stance remains largely dovish. Our analysis shows that for Fed rates to rise or taper, the board needs dovish members to converge toward hawkish ones on macroeconomic forecasts.

The chart compares minimum, maximum and median two-year forward dot projections with Fed rates. It shows that in the previous tightening cycle, between 2015 and 2018, the minimum rate projection, reflecting expectations from dovish members, had moved much more than the maximum, reflecting the hawkish members.

This finding highlights the role and importance of dovish members for reaching a consensus to adjust monetary policy. Reflecting this, since the implementation of dot projections and guidance, Fed rates have closely followed minimum dot projections, highlighting just how accommodative the Fed’s stance has been over the period.


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