FACTBOX: Fed staff forecasts from FOMC minutes

(Reuters) - The following are the Federal Reserve's staff forecasts as contained in the minutes of Federal Open Market Committee meetings:

MARCH 18 FOMC: Minutes released on April 8, 2008

"In the forecast prepared for this meeting, the staff substantially revised down its projection for the pace of real GDP throughout 2008. Although the available data on spending and production early in the first quarter were not materially weaker than the staff's expectations, many other indicators of real activity were more negative. Payroll employment declined substantially; oil prices surged again, crimping real household incomes; and measures of consumer and business sentiment deteriorated sharply. Moreover, house prices fell by more than anticipated, and conditions in a broad range of debt markets became more restrictive. The staff projection showed a contraction of real GDP in the first half of 2008 followed by a slow rise in the second half. The recently enacted fiscal stimulus package was expected to boost real GDP in the second half of 2008, but that effect was projected to unwind in 2009. The forecast showed real GDP rising at a rate somewhat above the growth rate of its potential in 2009, in response to the impetus from cumulative monetary policy easing, continued strength in net exports, a lessening drag from high oil prices, and a relaxation of financial market strains. Even with this pickup in growth in 2009, resource utilization was anticipated to follow a lower trajectory than in the previous forecast. The forecast for core PCE price inflation over the first half of 2008 was raised in response to elevated readings in recent months. In addition, the forecast for headline PCE price inflation incorporated a much higher rate of increase for energy prices for the first half of the year; as a result, headline PCE price inflation was expected to substantially exceed core PCE price inflation in 2008. By 2009, the forecasts for both the headline and core PCE price indexes showed inflation receding from its 2008 level, in line with the previous forecasts."

JAN 29-30 FOMC: Minutes released on February 20, 2008

"In the forecast prepared for this meeting, the staff revised up slightly its estimated increase in aggregate economic activity in the fourth quarter of 2007 but revised down its projected increase for the first half of 2008. Although data on consumer spending and nonresidential construction activity for the fourth quarter had come in above the staff's expectations, most of the information received over the intermeeting period was weaker than had been previously expected. The drop in housing activity continued to intensify, conditions in labor markets appeared to have deteriorated noticeably near year-end, and factory output had weakened. Consumer confidence remained low, and indicators of business sentiment had worsened. Equity prices had also fallen sharply so far in 2008, and, while the functioning of money markets had improved, conditions in some other financial markets had become more restrictive. The staff projection showed the weakness in spending dissipating over the second half of 2008 and 2009, in response to the cumulative easing of monetary policy since August, the abatement of housing weakness, a lessening drag from high oil prices, and the prospect of fiscal stimulus. Still, projected resource utilization was lower over the next two years than in the previous forecast. The projection for core PCE price inflation in 2008 was raised slightly in response to elevated readings in recent months. The forecast for headline PCE price inflation also incorporated a somewhat higher rate of increase for energy prices for the first half of 2008; as a result, headline PCE price inflation was now expected to exceed core PCE price inflation slightly for that year. The forecasts for both headline and core PCE price inflation for 2009 were unchanged, with both receding from their 2008 levels."

DEC 11 FOMC: Minutes released on January 2, 2008:

"In the forecast prepared for this meeting, the staff revised down its estimate of growth in aggregate economic activity in the fourth quarter. Although third-quarter real GDP was revised up sharply, most available indicators of activity in the fourth quarter were more downbeat than had previously been expected. Faster inventory investment contributed importantly to the upward revision to third-quarter real GDP, but part of that upswing was expected to be unwound in the fourth quarter. The available data for domestic final sales also suggested a weaker fourth quarter than had been anticipated. In particular, real personal consumption expenditures had been about unchanged in September and October, and the contraction in single-family construction had intensified. Providing a bit of an offset to these factors, however, was further improvement in the external sector. The staff also marked down its projection for the rise in real GDP over the remainder of the forecast period. Real GDP was anticipated to increase at a rate noticeably below its potential in 2008. Conditions in financial markets had deteriorated over the intermeeting period and were expected to impose more restraint on residential construction as well as consumer and business spending in 2008 than previously expected. In addition, compared with the previous forecast, higher oil prices and lower real income were expected to weigh on the pace of real activity throughout 2008 and 2009. By 2009, however, the staff projected that the drag from those factors would lessen and that an improvement in mortgage credit availability would lead to a gradual recovery in the housing market. Accordingly, economic activity was expected to increase at its potential rate in 2009. The external sector was projected to continue to support domestic economic activity throughout the forecast period. Reflecting upward revisions to previously published data, the forecast for core PCE price inflation for 2007 was a bit higher than in the preceding forecast; core inflation was projected to hold steady during 2008 as the indirect effects of higher energy prices on prices of core consumer goods and services were offset by the slight easing of resource pressures and the expected deceleration in the prices of nonfuel imported goods. The forecast for headline PCE inflation anticipated that retail energy prices would rise sharply in the first quarter of 2008 and that food price inflation would outpace core price inflation in the beginning of the year. As pressures from these sources lessened over the remainder of 2008 and in 2009, both core and headline price inflation were projected to edge down, and headline inflation was expected to moderate to a pace slightly below core inflation."

OCT 30-31 FOMC: Minutes released on November 20:

"In the forecast prepared for this meeting, which was formulated prior to the release of the advance estimates of the third-quarter national income and product accounts, the staff revised up its estimate of aggregate economic activity in the third quarter from its forecast presented at the September meeting in light of available indicators that suggested that consumer spending, business investment, and exports were stronger than previously expected. Nonetheless, the staff expected real GDP growth to be considerably slower in the fourth quarter, reflecting steepening declines in residential construction, reductions in the pace of motor vehicle production, and a smaller contribution from net exports. Looking forward, the staff expected residential investment to remain weak in 2008 with modest declines in house prices. In addition, the staff continued to expect the stress in credit markets and the appreciably higher oil prices indicated by futures markets to restrain spending by businesses and consumers, although the lower foreign exchange value of the dollar suggested some boost to net exports. On balance, real GDP growth for 2008 was projected to slow to a pace a bit below that of its potential, and unemployment was expected to creep up slightly. For 2009, the forecast called for real output growth to step up to a pace slightly above potential as the drags on economic activity exerted by the contraction in residential investment and financial strains were expected to abate. The staff's forecast for core PCE inflation was little changed from that presented at the September meeting because favorable incoming figures on core PCE inflation were offset by expectations for some limited feed-through into retail prices of recent increases in energy prices and for slightly less easing in resource utilization. The forecast for headline inflation was in the same range as that for core inflation in 2008 and 2009, reflecting expectations that energy prices would level off and then turn down and that increases in food prices would slow to a pace more in line with core inflation."