17  More precisely, the loss function that the central bank is assumed to minimize is the discounted sum of current and future squared deviations of inflation from 2 percent, current and future squared deviations of the unemployment rate from 6 percent, and current and future quarterly changes in the federal funds rate.
The last term is included to avoid unrealistically large quarterly movements in the “optimal” federal funds rate path. 18  This illustration takes the anticipated scale of asset purchases as fixed. The effect of these purchases, given that the modal expectation in the primary dealer survey was for $ billion of purchases, is implicitly already incorporated into the baseline forecast.