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03-12-2019, 09:48 AM
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Powell turns to impressionist art to show limits of the dot plot
 Fed chairmen don’t often draw on post-impressionist art to make a point on monetary policy. But that’s what Jerome Powell did Friday night in trying, again, to explain the limits of what’s popularly called the dot plot. Perhaps taking a cue from an iconic scene in “Ferris Bueller’s Day Offâ€, Powell showed a zoomed-in plot of dots that looked like gibberish, only to zoom out and show Georges Seurat’s “A Sunday afternoon on the island of La Grande Jatte.†“As you can see, if you are too focused on a few dots, you may miss the larger picture,†Powell said. The issue the Fed struggles with is that the dot plot of interest-rate forecasts is taken more or less a promise. But that’s not how the Fed intends them to be used. “Each participant’s dots reflect that participant’s view of the policy that would be appropriate in the scenario that he or she sees as most likely,†Powell said, referring to the summary of economic projections. “As someone who has filled out an SEP projection 27 times over the last seven years, I can say that there are times when I feel that something like the ‘most likely’ scenario I write down is, indeed, reasonably likely to happen. At other times, when uncertainty around the outlook is unusually high, I dutifully write down what I see as the appropriate funds rate path in the most likely scenario, but I do so aware that this projection may be easily misinterpreted, for what is ‘most likely’ may not be particularly likely. Very different scenarios may be similarly likely,†he said. Still, Powell doesn’t seem eager to get rid of the dot plot altogether. “My own view is that, if properly understood, the dot plot can be a constructive element of comprehensive policy communication,†he said. His view wasn’t universally shared at the last Federal Open Market Committee meeting, according to minutes of the Jan. 29-30 meeting. “These participants were concerned that, although the individual participants’ projections for the federal funds rate in the SEP reflect their individual views of the appropriate path for the policy rate conditional on the evolution of the economic outlook, at times the public had misinterpreted the median or central tendency of those projections as representing the consensus view of the Committee or as suggesting that policy was on a preset course. However, some other participants noted that the policy rate projections in the SEP are a valuable component of the overall information provided about the monetary policy outlook,†the minutes read. The next dot plot comes out on March 20. Source link More ??????? ??????: Powell turns to impressionist art to show limits of the dot plot || ??????: ahlam1399 || ??????: اسم منتداك
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