The Fed's January 24-25 FOM C meeting will mark the introduction of three changes to the Fed's communication strategy. The Fed will present its own forecast of the federal funds rate for the period 2012-2016. The Fed published a template last week illustrating what the forecast will look like when it is published on Wednesday, January 25. Using the Fed's templates, this is an example of how the two new charts would look like, which are additions to the current "Summary of Economic Projections." Please be advised that Charts 1 and 2 are NOT the Fed's forecast but only a mock-up adapted from the Financial Times. First, the Fed will publish a chart (see Chart 1) indicating the views of participants about when they expect to raise the federal funds rate. For example, Chart 1 shows that 10 members expect to increase the target federal funds rate in 2014.
Second, another chart would show the extent of monetary policy tightening projected for calendar years 2012-2014 and the longer-run. It will (see Chart 2) indicate "each participant's assessment of the target federal funds rate at the end of each calendar year 2012-2014 and the longer-run." For example, Chart 2 shows that 13 members expect the federal funds to be left unchanged in 2012. These forecasts are anonymous.
Third, the text will include "key factors" underlying the assessment of participants and"qualitative information regarding participants" expectations for the Federal Reserve's balance sheet. The Fed's balance sheet stood at 2.904 trillion as of January 19, 2011. We will comment on this aspect in greater detail in tomorrows edition.