Federal Reserve policymakers are widely expected to raise short-term interest rates this week. The policy statement should continue to suggest that, while the pace of tightening is expected to be gradual, action will remain data-dependent. As Chair Yellen recently testified, the Fed will not attempt to anticipate fiscal stimulus that may come from the new administration and Congress, but will respond to implications that tax cuts or additional government spending may have on the economic outlook. Chair Yellen’s four-term as chair ends in early February 2018. Personnel changes on the Board of Governors could have significant implications for the Fed over the next couple of years.

The Fed has worked hard on its communications in recent years and is much more open than it used to be. However, the central bank still has problems with how its messages are received. For example, former Chair Ben Bernanke would often make some conditional statement such as “A, but B.” Market participants would either hear the “A” or the “B” but not appreciate the subtleties (markets don’t do nuance). The dot plot, projections of the appropriate year-end federal funds target rate produced at every other FOMC meeting, is pretty simple. It shows the range of policy estimates for each senior Fed official (the governors and the 12 district bank presidents). There is a wide range among the forecasts and considerable uncertainty surrounding each of the dots. Officials do not know precisely how the economy will evolve in coming quarters. The correct answer to the question of where the Fed is headed is always “it depends,” but market participants have often viewed the dot plot as a plan of action. It’s not.

Over the last several quarters, the dots in the dot plot have consistently drifted lower, as the job market has tightened less than anticipated and inflation pressures have remained at bay.

This week, we ought to see little change in the dot plot relative to what officials were expecting in September. Recall than in September, most Fed officials expected to raise rates by the end of this year and most anticipated that there would be two rate hikes in 2017.