FACTBOX-Fed staff forecasts from FOMC minutes

JUNE 23-24 FOMC: Minutes released on July 15:

"In the forecast prepared for the June meeting, the staff
revised upward its outlook for economic activity during
the remainder of 2009 and for 2010. Consumer spending
appeared to have stabilized since the start of the
year, sales and starts of new homes were flattening out,
and the recent declines in capital spending did not look
as severe as those that had occurred around the turn of
the year. Recent declines in payroll employment and
industrial production, while still sizable, were smaller
than those registered earlier in 2009. Household wealth
was higher, corporate bond rates had fallen, the value
of the dollar was lower, the outlook for foreign activity
was better, and financial stress appeared to have eased
somewhat more than had been anticipated in the staff
forecast prepared for the prior FOMC meeting. The projected
boost to aggregate demand from these factors more than offset
the negative effects of higher oil prices and mortgage rates.
The staff projected that real GDP would decline at a
substantially slower rate in the second quarter than it had in
the first quarter and then increase in the second half of 2009,
though less rapidly than potential output. The staff also
revised up its projection for the increase in real GDP in 2010,
to a pace above the growth rate of potential GDP. As a
consequence, the staff projected that the unemployment rate
would rise further in 2009 but would edge down in 2010.
Meanwhile, the staff forecast for inflation was marked up.
Recent readings on core consumer prices had come in a bit
higher than expected; in addition, the rise in energy prices,
less-favorable import prices, and the absence of any downward
movement in inflation expectations led the staff to raise its
medium-term inflation outlook. Nonetheless, the low level of
resource utilization was projected to result in an appreciable
deceleration in core consumer prices through 2010. Looking
ahead to 2011 and 2012, the staff anticipated that financial
markets and institutions would continue to recuperate, monetary
policy would remain stimulative, fiscal stimulus would be
fading, and inflation expectations would be relatively well
anchored. Under such conditions, the staff projected that real
GDP would expand at a rate well above that of its potential,
that the unemployment rate would decline significantly, and
that overall and core personal consumption expenditures
inflation would stay low."
((Reuters Washington Newsroom, 202 898 8310))