Here is a photo of the federal funds release before and after the CPI/FOMC SEP release:
Source: FMC accessed 06/12/2024, 1:30 p.m.
Before this news, the implied decline for 2024 was 35 basis points, today it is 39 basis points. How many drops? Using modal probabilities:
Source: FMC accessed 06/12/2024, 1:30 p.m.
Two drops of 25 basis points before, two drops after the news.
Current commentary emphasizes that the right balance between one and two reductions in the SEP (see SEP here).
Market expectations (i.e. ex ante measures) are important for behavior. Which will turn out to be the most accurate in terms of forecasts. This question is taken up in Carpinelli et al. (2024).
