(Reuters) - The following are the Federal Reserve’s staff forecasts as contained in the minutes of recent Federal Open Market Committee meetings:
JAN 27-28 FOMC: Minutes released on Feb. 18:
“The staff estimated that real GDP growth in the second half of 2014 was faster than in the projection prepared for the December meeting, primarily reflecting stronger-than-expected consumer spending. Even so, real GDP was still estimated to have risen more slowly in the fourth quarter than in the third quarter, as changes in both net exports and federal government purchases appeared likely to have subtracted from real GDP growth in the fourth quarter following large positive contributions in the previous quarter.
“The staff’s outlook for economic activity over the first half of 2015 was revised up since December, in part reflecting an anticipated boost to consumer spending from declines in energy prices. However, the forecast for real GDP growth over the medium term was little revised, as the greater momentum implied by recent spending gains and the support to household spending from lower energy prices was about offset by the restraint implied by the recent appreciation of the dollar. The staff continued to forecast that real GDP would expand at a modestly faster pace in 2015 and 2016 than it did in 2014 and that it would rise more quickly than potential output, supported by increases in consumer and business confidence and a pickup in foreign economic growth, as well as by a U.S. monetary policy stance that was assumed to remain highly accommodative for some time. In 2017, real GDP growth was projected to begin slowing toward, but to remain slightly above, the rate of growth of potential output. The expansion in economic activity over the medium term was anticipated to lead to a slow reduction in resource slack, and the unemployment rate was expected to decline gradually and to move slightly below the staff’s estimate of its longer-run natural rate for a time.
“The staff’s forecast for inflation in the near term was revised down, as further sharp declines in crude oil prices since the December FOMC meeting pointed toward a somewhat larger transitory decrease in the total PCE price index early this year than was previously projected. In addition, the incoming data on consumer prices apart from those for energy showed a somewhat smaller rise than anticipated. The staff’s forecast for inflation in 2016 and 2017 was essentially unchanged, with inflation projected to remain below the Committee’s 2 percent objective. Nevertheless, inflation was projected to reach 2 percent over time, with inflation expectations in the longer run assumed to be consistent with the Committee’s objective and slack in labor and product markets anticipated to fade.
“The staff viewed the uncertainty around its projections for real GDP growth, the unemployment rate, and inflation as similar to the average over the past 20 years. The risks to the forecast for real GDP growth were viewed as tilted a little to the downside, reflecting the staff’s as-sessment that neither monetary policy nor fiscal policy was well positioned to help the economy withstand adverse shocks. At the same time, the staff viewed the risks around its outlook for the unemployment rate as roughly balanced. The downside risks to the forecast for inflation were seen as having increased somewhat, partly reflecting the recent soft monthly readings on core inflation.”
DEC 16-17 FOMC: Minutes released on Jan. 7:
“In the staff forecast prepared for the December FOMC
meeting, real GDP growth in the second half of 2014
was higher than in the projection for the October meeting,
largely reflecting stronger-than-expected data for PCE. Nevertheless, real GDP growth was anticipated
to slow in the fourth quarter as both net exports and
federal government purchases — important positive contributors
to real GDP growth in the third quarter—were
anticipated to drop back. The staff’s medium-term forecast
for real GDP growth was revised up a little on net.
The projected path for oil prices was lower, and the trajectory
for equity prices was a bit higher. And although
the projected path of the dollar was revised up, the staff
revised down its estimate of how much the appreciation
of the dollar since last summer would restrain projected
growth in real GDP. The staff continued to forecast that
real GDP would expand at a faster pace in 2015 and
2016 than it had this year and that it would rise more
quickly than potential output, supported by increases in
consumer and business confidence and a pickup in foreign
economic growth, along with monetary policy that
was assumed to remain highly accommodative for some
time. In 2017, real GDP growth was projected to begin
slowing toward, but to remain above, the rate of potential
output growth as the normalization of monetary policy
was assumed to proceed. The expansion in economic
activity over the medium term was anticipated to
slowly reduce resource slack, and the unemployment
rate was expected to decline gradually and to temporarily
move slightly below the staff’s estimate of its longer-run
natural rate.
“The staff’s forecast for inflation in the near term was revised
down to reflect the further large energy price declines
since the October FOMC meeting, which were anticipated
to lead to a temporary decrease in the total PCE
price index late this year and early next year. The staff’s
inflation projection for the next few years was essentially
unchanged; the staff continued to project that inflation
would move up gradually toward, but run somewhat below,
the Committee’s longer-run objective of 2 percent.
Nevertheless, inflation was projected to reach the Committee’s
objective over time, with longer-run inflation
expectations assumed to remain stable, prices of energy
and non-oil imports forecast to begin rising next year,
and slack in labor and product markets anticipated to diminish
slowly.
“The staff viewed the uncertainty around its projections
for real GDP growth, the unemployment rate, and inflation
as similar to the average over the past 20 years. The
risks to the forecast for real GDP growth and inflation
were viewed as tilted a little to the downside, reflecting
the staff’s assessment that neither monetary policy nor
fiscal policy was well positioned to help the economy
withstand adverse shocks. At the same time, the staff
viewed the risks around its outlook for the unemployment
rate as roughly balanced.”
OCT 28-29 FOMC: Minutes released on Nov. 19:
“The information on economic activity received since the
staff prepared its forecast for the September FOMC
meeting was close to expectations, and therefore, the
staff’s projection for real GDP growth over the remainder
of the year was little revised. However, in response
to a further rise in the foreign exchange value of the dollar,
a deterioration in global growth prospects, and a decline
in equity prices, the staff revised down its projection
for real GDP growth a little over the medium term.
Even with the slower expansion of economic activity in
this projection, real GDP was still expected to rise faster
than potential output in 2015 and 2016, supported by
accommodative monetary policy and a further easing of
the restraint on spending from changes in fiscal policy;
in 2017, real GDP growth was projected to step down
toward the rate of potential output growth. As a result,
resource slack was anticipated to decline steadily, albeit
at a slightly slower rate than in the previous projection,
and the unemployment rate was expected to gradually
improve and to be at the staff’s estimate of its longerrun
natural rate in 2017.
“The staff’s forecast for inflation this quarter and early
next year was reduced in response to further declines in
crude oil prices, but the forecast for inflation over the
medium term was only a touch lower. Consumer price
inflation was projected to be lower in the second half of
this year than in the first half and to remain below the
Committee’s longer-run objective of 2 percent over the
next few years. With resource slack projected to diminish
slowly and changes in commodity and import prices
anticipated to be subdued, inflation was projected to rise
gradually and to reach the Committee’s objective in the
longer run.
“The staff continued to view the uncertainty around its
projections for real GDP growth, the unemployment
rate, and inflation as similar to the average over the past
20 years. The risks to the forecast for real GDP growth
and inflation were seen as tilted to the downside, reflecting
recent financial developments and concerns about
the foreign economic outlook, as well as the staff’s assessment
that neither monetary policy nor fiscal policy
appeared well positioned to help the economy withstand
adverse shocks. At the same time, the staff continued to
view the risks around its outlook for the unemployment
rate as roughly balanced.”
SEPT 16-17 FOMC: Minutes released on Oct. 8:
“In the economic forecast prepared by the staff for the
September FOMC meeting, the projection for growth in
real gross domestic product (GDP) in the second half of
this year was revised down slightly from the one prepared
for the previous meeting, primarily because of a
somewhat weaker near-term outlook for consumer
spending. The staff’s medium-term forecast for real
GDP was also revised down a little, reflecting a higher
projected path for the foreign exchange value of the dollar
along with slightly smaller projected gains for home
prices. The staff still anticipated that the pace of real
GDP growth in 2015 and 2016 would exceed the growth
rate of potential output, supported by continued increases
in consumer and business confidence, the further
easing of the restraint on spending from changes in
fiscal policy, additional improvements in credit availability,
and a pickup in foreign economic growth. In 2017,
real GDP growth was projected to begin slowing toward,
but to remain above, the rate of potential output
growth. The expansion in economic activity over the
projection period was anticipated to steadily reduce resource
slack, and the unemployment rate was expected
to decline gradually and temporarily move slightly below
the staff’s estimate of its longer-run natural rate toward
the end of the period.
“The staff’s near-term forecast for inflation was a little
lower than the projection prepared for the previous
FOMC meeting, reflecting recent readings on core consumer
price inflation that were lower than anticipated
and declines in oil prices that were faster than expected,
but the forecast for inflation over the medium term was
little changed. The staff continued to project inflation
to be lower in the second half of this year than in the
first half and to remain below the Committee’s longerrun
objective of 2 percent over the next few years. With
longer-term inflation expectations assumed to remain
stable, resource slack projected to diminish slowly, and
changes in commodity and import prices expected to be
subdued, inflation was projected to rise gradually and to
reach the Committee’s objective in the longer run.
Overall, the staff’s economic projection for the September
meeting was quite similar to the forecast presented
at the June meeting, when the FOMC last prepared a
Summary of Economic Projections (SEP). The staff’s
September projection showed a slightly higher path for
the unemployment rate, a bit lower real GDP growth,
and essentially no change to inflation compared with its
June forecast.
“The staff continued to view the uncertainty around its
projections for real GDP growth, the unemployment
rate, and inflation as similar to the average over the past
20 years. The risks to the forecast for real GDP growth
were still seen as tilted a little to the downside, as neither
monetary policy nor fiscal policy was viewed as well positioned
to help the economy withstand adverse shocks.
At the same time, the staff viewed the risks around its
outlook for the unemployment rate and for inflation as
roughly balanced.”
Reuters Washington Newsroom
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