Dots and Taylor

In the picture, the Fed dots before and after the meeting, the market rates (feds funds futures) and the Taylor rule (Yellen’s specification, using terminal unemployment and interest rates as NAIRU and risk neutral rate, respectively). Note:

i)                 Markets continue to be more dovish than the Fed

ii)                Taylor rule illustrates the time inconsistency

iii)               Taylor rule from last December (not shown) was very similar to this one, suggesting that Fed got more hawkish (it wasn’t a change in the scenario, but a change in the composition (or behavior) of the committee)