What is interesting in the projections is that for the first time in a long time, members of the FOMC have been more inclined to project higher rates in 2015 than the previous round of forecasts. While there is still a decent spread on where rates are likely to be, there are very few members that don't think extremely low rates won't be unwound to at least 1% by the end of that year.
This only takes us back to where expectations where in September 2012, just as the Fed embarked on the most recent round of QE. But it does represent an inflection point in the perceived risks to the outlook that we haven't seen for sometime.
Growth forecasts were revised a little lower in 2013 and a little higher in 2014, but what seems to be much more important is the balance of risks to outcomes. With fiscal tightening not proving to be as disastrous as feared and the fallout from the Euro crisis contained for now, the FOMC appears to be much more confident.
The big bet for markets now is whether the Fed is right. Certainly they have been premature in their expectations of recovery in the past, with Dudley's recent speech alluding to the error of being too optimistic in the last few years (see this post).
Also most of the recent data suggests growth is slowing if anything, so perhaps its worth being cautious of things not panning out as positively as expected.
But the market reaction is certainly a lot different than previous periods where QE was expected to come to an end. While we are still some way away from that, the end of QE1 & 2 saw yields decline sharply rather than rise. Given the sell off in bonds and generally stronger equity markets, perhaps markets are also on the same page as the Fed.
