Today’s FOMC interest rate forecasts reveal an updated look at the thinking of the Fed. In January The Federal Reserve began releasing forecasts for the year-end Federal Funds rate from each FOMC member. They don’t identify each forecast with a name, but in aggregate this provides a very clear view of thinking on rate policy at the Fed. Nobody can complain that Bernanke is being anything other than totally open.

In January, their median forecast for short term rates was 0.25% at the end of 2013 and 0.75% for the end of 2014, suggesting they expect to raise rates by 0.5% in 2014. Each FOMC member’s forecast for each year is represented by a blue dots on a chart that the FOMC publishes. The eurodollar futures market reflected expectations of only around 0.3% of tightening, though it did subsequently move out to 0.50% before returning to around 0.35%.

Today, the updated forecasts reflect an expectation of a 0.75% increase based on median rate forecasts. The FOMC expects to raise rates by this amount in 2014, a more hawkish forecast than they made in January. The futures market is looking for only half of this move.

The market may be right; the FOMC’s forecast is just that, and they may turn out to be overly optimistic on how the economy, inflation and unemployment will perform. But it does provide a fascinating insight into their thinking as it evolves.

Disclosure: Author is Long the Sep ’13/Sep ’14 eurodollar calendar spread.

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