Publish date:

Bond Yields Rise and Gold Tumbles Ahead of Fed Dot Plot Meeting

Gold has slipped a bit and Treasury yields are up a bit ahead of the Fed's next interest rate decision on Wednesday.
Dot Plot March 2021

The Fed has a two-day meeting this Tuesday and Wednesday. The last two-day meeting in which the Fed gave Economic Projections was in March.

In March, the year-over-year CPI was 2.6%. Since then, inflation as measured by the CPI has been on a tear. 

CPI Year-Over-Year Percent Change 

CPI Year-Over-Year Percent Change NSA 2021-05A

Fed Economic Projections March 2021

Fed Economic Projections March 2021

In March, the Fed projected inflation to be around 2% through 2023. The Fed uses a PCE (Personal Consumption Expenditures) measure of inflation not a CPI measure. 

The PCE has been running well below the CPI. PCE includes items purchased on behalf of consumers (corporate-paid medical care is the most significant example) whereas the CPI only contains items the consumer directly buys. 

The CPI weighs rent far more heavily than than PCE. Neither measure directly includes housing prices. They both fail miserably as inflation measures. 

Dot Plot

The dot plot in March shows unanimous opinion among Fed participants there would be no hikes this year. In 2021, only 3 of 17 expected a hike. 

Fantasyland Projections

Previous dot plots highlight Fantasyland projections.

Dot Plot 2018-09-26
Dot Plot Fantasyland

Clown Act


I am curious as to which Fed clown predicted a 5% Fed Funds rate for 2020. Another predicted 4%. 

Such predictions are amazing in light of what they would do to interest on national debt.

Fed Chases Its Tail

Dot plots are to be faded and mocked not believed as the Fed chases its tail.

Whatever the Fed comes up with on Wednesday for long-term expectations, don't expect it to be any better than a coin flip as to what will happen (and most likely far worse).

The Fed is behind the inflation curve for now. It will be interesting to see how that translates into Fed expectations of future hikes.

Gold Falling, Yields Rising

The yield on the 10-year note and 30-year long bond are up 3 basis points and 4 basis points respectively today. Gold is down another $13 or so on the day. 

For about a week, gold has been falling and yields rising as if we will get important revelations on Wednesday. 

Here's a clue: We won't.

Is Inflation Transitory?

For discussion of those who believe inflation to be transitory, please consider Economist David Rosenberg Says the Bond Market Has Inflation Right


Like these reports? I hope so, and if you do, please Subscribe to MishTalk Email Alerts.

Subscribers get an email alert of each post as they happen. Read the ones you like and you can unsubscribe at any time.

If you have subscribed and do not get email alerts, please check your spam folder.


Mortgage Rates Move Higher on Fed Dot Plot Projections

How many hikes can the Fed get in this year? The Fed estimate is two more. Mortgage rates rose on the news.

Yield Curve and Spreads Ahead of the Fed Rate Cut Decision

Here is the final snapshot of the yield curve and spreads ahead of the first interest rate cut since 2008.

Fed Pledges "Patience", Dot Plot Suggests No Hikes in 2019

Today the Fed pledged patience and a majority of officials signaled they might not raise the rate at all this year.

Fed Cuts Rates 1/4 Percent, Three Dissents: Dot Plot Suggests No More 2019 Cuts

The Fed cut interest rates 25 basis point to a target of 1.75% to 2.00%. There were three dissents.

Fed Hikes 1/4 Point as Expected: Dot Plot Indicates One More 2018 Hike Coming

In its FOMC statement, the Fed says the economy continues to strengthen, unemployment is low, and spending is strong.

Dot Plot Fantasyland Flashback vs Current Rate Cut Expectations

In December, Powell said the Fed was on "autopilot". Let's compare those dot plots with current Fed Fund Futures.

Dot Plot Fantasyland Projections

The Economic projections made at today's FOMC meeting are straight from Fantasyland

Fed-Proof Bond Bet?

The yield curve is the flattest since 2007. Nonetheless, traders think it will get flatter. The bond bet du jour is the next Fed chair will keep hiking but not as much as the Fed thinks.

Powell Is Concerned About Dots

In Jerome Powell's speech on Friday, he displayed a huge concern over the dot plot, an estimation of future rate hikes.