For example, in addition to their point estimates, participants were asked to indicate the percent chance they assigned to the federal funds rate being at various levels when the FOMC first announces a change to the reinvestment policy. They were also asked to assign probabilities to different dates for the first announced change in reinvestment policy. Why is this information important?
To go back to Jeremy Stein’s argument about the taper tantrum, Jeremy pointed out that market participants’ expectations for tapering varied widely, but he conjectured that some of the participants were very certain in their expectations and that it was primarily their reaction that fueled the taper tantrum.