Yellen Says Nothing Set in Stone About Path of Policy

The video discusses the uncertainty and revisions in FOMC projections, highlighting the challenges in comparing RCP and market paths. It explains the difference between modal and mean outcomes and the role of term premiums in affecting market paths.

What is a key reason for the uncertainty in FOMC projections?

• Participants revise their views over time.

• FOMC participants have fixed views.

• Projections are based on past data only.

• There is a lack of data.

Why is it difficult to compare FOMC projections with market implied paths?

• FOMC participants write down the most likely outcomes, not the mean rate.

• Market paths are not based on data.

• Market paths are fixed and unchanging.

• FOMC projections are always higher.

What do FOMC participants consider when writing down their projections?

• The highest possible rate.

• The most likely or modal outcome for rates.

• The lowest possible rate.

• The mean rate of all possible outcomes.

What is the effect of negative term premiums on market implied paths?

• They have no effect on the plots.

• They increase the difference between market and FOMC plots.

• They reduce the difference between market and FOMC plots.

• They make the market plot higher than the FOMC plot.

What is a term premium in the context of market implied paths?

• An additional return required by investors.

• A risk-free rate.

• A penalty for early withdrawal.

• A fixed interest rate.