Federal Reserve Survey.pdf

Most dealers expected the Committee to upgrade its assessment of the labor market and note stable or slightly higher market-based measures of inflation compensation in the December FOMC statement. They anticipated no change in the Committee's communication on reinvesting principal payments on Treasury and agency securities. Some dealers expected the forward guidance language to reflect the Committee's decision to increase the target range by 25 basis points, with an emphasis on a gradual pace of policy tightening. Dealers also expected the medians of FOMC participants' economic projections and year-end target federal funds rate projections to shift modestly downward, with a likely gradual pace of policy tightening and historically low equilibrium real fed funds rates. Many dealers anticipated Chair Yellen's press conference remarks to emphasize a gradual pace of policy tightening and data-dependent subsequent increases in the target range. The perceived stance of monetary policy was expected to be less accommodative or neutral following the December FOMC meeting. Dealers assigned an 87% probability to a December 2015 increase in the federal funds target rate or range, with a median estimate of 0.50% for the target rate immediately following the meeting.