Fed watching 101: Economics and Rates

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Fed watching 101: Economics and Rates

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US Viewpoint

Primer

Fed watching basics 14 June 2026

In this primer, we explain the basics of Fed watching. We cover the Fed’s dual mandate, Economics

voting rules & membership structure, the communication toolkit, frameworks to assess United States

the policy stance, market pricing (using fed funds & SOFR) and the balance sheet. Stephen Juneau

US Economist

BofASDual mandate: maximum employment and stable prices +1 202 442 7429

The Fed has a dual mandate of maximum employment and stable prices, which it has stephen.juneau@bofa.com

defined as a 2% PCE inflation target. The dual mandate can lead to trade-offs in the Mark Cabana, CFA

short run. Rate hikes tend to lower inflation and raise unemployment, while cuts do the RatesBofASStrategist

opposite. The trade-off gets challenging when the economy is hit by supply shocks. In mark.cabana@bofa.com

these instances, addressing risks to one mandate means exacerbating risks to the other. Aditya Bhave

Fed voting rules: it takes seven BofASaditya.bhave@bofa.com

The Fed sets policy based on a majority vote by the FOMC. There are up to 12 voting Katie Craig

members on the FOMC: all Governors, the NY Fed President and four regional Presidents RatesBofASStrategist

who rotate annually. So it usually takes seven votes to get a majority. This year’s voting katie.craig@bofa.com

members lean hawkish, but Warsh’s likely dovish leaning could offset that. US Economics

BofAS

Communication: statements, SEP, pressers, speeches USBofASRates Research

The Fed has become increasingly transparent and adopted more communication tools See Team Page for List of Analysts

over time. The Fed’s communication toolkit includes: the official policy statement after