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Illustration: Sarah Grillo/Axios

The Federal Reserve surprised the market Wednesday with new hints about its timeline for a rate liftoff — and an acknowledgment of taper talk.

Driving the news: Investors were on one hand relieved the Fed may act to keep the market from getting (more) overheated, and on the other skittish about the pending removal of the punchbowl.

Why it matters: The signals point to a Fed that's increasingly willing to contemplate a pullback from the emergency market support that began last spring in reaction to the pandemic. But don't expect these changes to happen any time soon.

What changed: The "dot plot" of Fed member sentiment indicates a median expectation of two rate hikes by the end of 2023, up from zero.

  • Fed chair Jerome Powell acknowledged that this week's meeting of the Federal Open Market Committee is the "talking about talking about tapering" meeting.
  • That means that it may actually begin discussing the appropriate timeline to taper its $120 billion per month asset purchases at its next meeting (July 27-28).

What didn't change: There still won't be any tapering until December or the beginning of next year — at the earliest.

  • The Fed still isn't likely to hike interest rates for years.

What they're saying: "The Fed is still going to be remaining accommodative from a policy standpoint," Don Ellenberger, senior portfolio manager at Federated Hermes, tells Axios.

  • Especially considering the "real" fed funds rate, after accounting for inflation of around 2%, will be negative for the next two or three years, Ellenberger notes.

State of play: Markets went into risk-off mode, with equities declining and the Treasury yield curve flattening somewhat.

  • The market's reaction is probably "a bit of digestion, and a bit of position-squaring," Ellenberger says. After that works its way through the system, markets may very well return to new highs in the short term.

Our thought bubble, via Axios' Felix Salmon: Rates have been at zero for well over a year and will remain at zero for well over a year, which makes all Fed announcements inherently anticlimactic.

  • In a desperate attempt to find something — anything — to seize upon, observers turn to the dot plot and parsing the semantics of "talking." But the big picture remains exactly what we knew it would be: No change to anything.
Here are the dots. Now ignore them.
Chart: Federal Reserve Board

The Fed updated its "dot plot," which tallies where each member expects the benchmark fed funds rate to be at the end of 2021, 2022 and 2023.

Driving the news: The new median dots imply there would be two rate hikes by the end of 2023. This compares to the March dot plot that implied no rate hikes in that year.

  • Stocks sold off and interest rates jumped on the change, suggesting market participants are worried tighter monetary policy is coming sooner.

What they’re saying: Powell explicitly pushed back on this interpretation, saying: "Dots are not a great forecaster of future rate moves. … Dots are to be taken with a grain of salt."

Others former Fed chairs agree...

“I think that one should not look to the dot plot, so to speak, as the primary way in which the Committee wants to or is speaking about policy.”
Janet Yellen, March 19, 2014
“I think you could also retitle this conference 'Why We Don’t Like the Dot Plot.' I think the dot plot is like the advanced level of the video game. If you haven’t been to the first 12 levels, forget about the dot plot.”
Ben Bernanke, Nov. 30, 2016

Go deeper

Fed may raise rates sooner, as inflation is higher than expected

Feb chair Jerome Powell. Photo: Susan Walsh/Getty Images

The Federal Reserve kept rates unchanged at its latest policy meeting, but a shift in sentiment emerged as to how soon it should begin raising rates.

Why it matters: The Fed's rock-bottom rates policy and monthly asset purchases helped the U.S. markets avoid a meltdown during the COVID-19 crisis last year. But as the economy recovers, a chorus is growing for the Fed to at least consider a timeline for pulling back its support before things get overheated.

Linh Ta, author of Des Moines
Jun 16, 2021 - Axios Des Moines

Iowa's traffic nears pre-pandemic levels

Expand chart
Data: Iowa DOT; Chart: Axios Visuals

If Des Moines-area traffic jams bring you back, circa 2019 — you're not wrong.

Driving the news: Traffic in the Des Moines metro has returned to within nearly 5% of pre-pandemic levels, according to the Iowa Department of Transportation.

  • Afternoon traffic volumes are higher than mornings, state DOT official Jeff Von Brown told Axios.

Flashback: Traffic levels plummeted to 28% below normal in the metro last spring, when the pandemic and restrictions forced people to stay home.

  • It dipped again in the winter when Gov. Kim Reynolds urged Iowans not to travel. But it rebounded this spring as vaccines became more widely available.

What's ahead: Employees are returning to downtown workplaces this summer through fall, said Tiffany Tauscheck, chief operations officer for the Greater Des Moines Partnership.

  • Wells Fargo, Principal, Meredith, Krause Group and EMC are planning returns by September, the Register reports.
  • But companies like Nationwide are expecting a "yearslong" return, nixing its pre-pandemic work model.

Of note: The state DOT is planning on installing stop-and-go lights along I-235 on-ramps to control traffic flow, starting 2023.

Bezos beats Branson in space billionaires' battle for attention

Photo illustration: Aïda Amer/Axios. Photo: Imtiyaz Shaikh (Anadolu Agency), Drew Angerer/Getty Images

Jeff Bezos' flight into space generated more interest from the public than Richard Branson's, and both billionaires overshadowed their respective space companies.

Why it matters: Data shows an outsized public interest in the personalities at the center of the space trips, compared to the companies behind them — which could reinforce public suspicion that the ventures were partly vanity plays.