WASHINGTON, (Reuters) - The following are the Federal Reserve’s staff forecasts as contained in the minutes of recent Federal Open Market Committee meetings:
DECEMBER 14 FOMC: Minutes released on January 4:
“With the recent data on production and spending stronger, on balance, than the staff anticipated at the time of the November FOMC meeting, the staff revised up its projected increase in real GDP in the near term. However, the staff’s outlook for real economic activity over the medium term was little changed, on net, relative to the projection prepared for the November meeting. The staff forecast incorporated the assumption that new fiscal actions, some of which had not been anticipated in its previous forecast, were likely to boost the level of real GDP in 2011 and 2012. But, compared with the November forecast, a number of other conditioning assumptions were less favorable: House prices and housing activity were likely to be lower, while interest rates, oil prices, and the foreign exchange value of the dollar were projected to be higher, on average, than previously assumed. As a result, although the staff projection showed a higher level of real GDP, the average pace of growth over 2011 and 2012 was little changed from the November forecast, and the unemployment rate was still projected to decline slowly.
“The underlying rate of consumer price inflation in recent months was lower than the staff expected at the time of the November meeting, and the staff forecast anticipated that core PCE prices would rise a bit more slowly in 2011 and 2012 than previously projected. As in earlier forecasts, the persistent wide margin of economic slack in the projection was expected to sustain downward pressure on inflation, but the ongoing stability in inflation expectations was anticipated to stem further disinflation. The staff anticipated that relatively rapid increases in energy prices would raise total consumer price inflation above the core rate in the near term, but that this upward pressure would dissipate by 2012.”
NOVEMBER 2-3 FOMC: Minutes released on November 23:
“Because the recent data on production and spending were broadly in line with the staff’s expectations, the forecast for economic activity that was prepared for the November FOMC meeting showed little change to the staff’s near-term outlook relative to the forecast prepared for the September FOMC meeting. However, the staff revised up its forecast for economic activity in 2011 and 2012. In light of asset market developments over the intermeeting period, which in large part appeared to reflect heightened expectations among investors that the Federal Reserve would undertake additional purchases of longer-term securities, the November forecast was conditioned on lower long-term interest rates, higher stock prices, and a lower foreign exchange value of the dollar than was the staff’s previous forecast. These factors were expected to provide additional support to the recovery in economic activity. Accordingly, the unemployment rate was anticipated to recede somewhat more than in the previous forecast, although the margin of slack at the end of 2011 was still expected to be substantial.
“The staff’s forecast continued to show subdued rates of headline and core inflation during 2011 and 2012. However, the downward pressure on inflation from slack in resource utilization was expected to be slightly less than previously projected, and prices of imported goods were anticipated to rise somewhat faster. As in previous forecasts, further disinflation was expected to be checked by the ongoing stability of inflation expectations.”