Free Trial

Real-time Actionable Insight

Get the latest on Central Bank Policy and FX & FI Markets to help inform both your strategic and tactical decision-making.

Free Access

MNI(REPEAT): Fed Dots To Signal Faster Tightening- ExOfficials


The Federal Reserve on Wednesday is likely to signal a more aggressive approach to tightening monetary policy coming out of the pandemic, with a fresh dot plot that may show growing support for lifting interest rates next year and hikes once a quarter in 2024, former officials told MNI.

The FOMC meets Tuesday and Wednesday and is expected to affirm its commitment to start winding down pandemic-era stimulus policies this year by paring its USD120 billion monthly asset purchase program. Rate hikes will follow when more stringent employment and inflation objectives are met, with heightened risks a hike could come as soon as next year. Delta variant uncertainty could see some FOMC members hold off from advancing rate hike dots, former officials said.

"I expect the distribution among participants to spread out more and for the median to move a bit up in time into 2022," former Fed Vice Chair Alan Blinder said in an interview.

It would take two or more FOMC members pulling forward liftoff into next year to shift the median to 2022. While some ex-Fed officials see 2022 and 2023 individual dots floating upward, many also predicted liftoff staying in 2023 at this meeting. Once rates lift off, the former officials expect rates to march higher each quarter as the economy nears the Fed's dual mandate goals.


"Liftoff later in 2022 is not off the table," said Jonathan Wright, a former member of the Fed Board's division of monetary affairs and current New York Fed adviser. "But I wouldn't expect, with the recent inflation numbers or the most recent employment report, that you're going to get people at this stage moving their projection forward into 2022." The last job report fell well short of market expectations and inflation showed some signs of peaking.

The Fed's goal of getting inflation clearly averaging around 2% means it's more likely they will take a slower approach to liftoff and raising rates in 2023, Wright said. "Then by the time you get to 2024 it will be a more normal reaction function to what is hopefully by then a recovery that's well underway." He expects the FOMC to show rates at 1.6% in 2024.

Others see a more forceful tightening cycle after liftoff. "I'd expect something like four increases or maybe even more (in 2024)," said former Minneapolis Fed President Gary Stern. "You're starting from a low base and you're going into 2024 at pretty low levels in my judgment. I wouldn't even be shocked if we got up to 2% to 2.25%."

Former Atlanta Fed President Dennis Lockhart told MNI that once the Fed sees its economic goals being met rates could rise steadily toward estimates of r-star, with an increase every meeting as was the case in the 2004-2006 hiking cycle. "If the objectives are not met, it could conceivably go slower, instead of every meeting eight times a year, go to a quarterly pace, although a slower pace presents communications challenges," he said.


Fed inflation forecasts are seen being lifted this year to reflect supply shortages, while views on next year will remain anchored near 2% as those short-term pressures fade while coronavirus variant risks remain, ex-officials said. Risks to the inflation outlook are likely to be more balanced now compared to June, when every official saw risks to the upside.

"The jobs report and the very mixed picture on the public health situation would seem to me to give pause to the committee as a group. I suppose some individuals could shift their dots because they're looking past this period, but my expectation is it's a good meeting not to adjust projections," Lockhart said.

In the end, the dot plot may replay this year's ongoing divide between Chair Jerome Powell's demands for solid data showing a recovery and downplaying the views of his more hawkish deputies about pulling back stimulus.

"Powell will downplay the dots," said Tara Sinclair, a former visiting economist at the St. Louis Fed. "I can see them pretty clearly showing four hikes in 2024, but with a wink and a nod that we will have to really see how conditions are when we get there and even then maybe they'll only do two of those four, or three of the four."

MNI Washington Bureau | +1 202-371-2121 |
MNI Washington Bureau | +1 202-371-2121 |

To read the full story

Why Subscribe to


MNI is the leading provider

of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.

Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.