Our survey of Wall Street economists reveals that expectations about monetary policy have been shifting.
Last month, the survey found that Wall Street expected the Fed to halt asset purchases when the unemployment rate reached 6.5 percent. The expectations in the latest survey rose to 6.8 percent.
That could be because since the December survey the Fed provided more guidance in its monetary policy statement, pegging a 6.5 percent unemployment rate to interest rate hikes. This suggests to markets that the end of asset purchases would be somewhere above that unemployment rate.
The market also sees the Fed halting assets purchases at a 2.6 percent inflation rate, down from 3.4 percent in the prior survey.
This is extremely important because the Fed is now heavily reliant on what Ben Bernanke describes as "signaling." That is to say, the Fed believes it can change economic behavior by using its public statements to change expectations about policy moves.