Reuters - The following are the Federal Reserve's staff forecasts as contained in the minutes of recent Federal Open Market Committee meetings:
"In the U.S. economic forecast prepared by the staff for the April FOMC meeting, real GDP growth in the first half of the year was lower than in the projection prepared for the March meeting, as the data on economic activity received during the intermeeting period were generally weaker than the staff had expected. However, much of this weakness was attributed to transitory factors or statistical noise, with little implication for the pace of expansion beyond the near term. Indeed, the medium-term projection for real GDP growth was re-vised up modestly, as monetary policy was assumed to be a little more accommodative in this projection and the projected path for the foreign exchange value of the dollar was a little lower. The staff continued to project that real GDP would expand at a faster pace than potential output in 2015 and 2016, supported by increases in consumer and business confidence and a small pickup in foreign economic growth, even as the normalization of monetary policy was assumed to begin. In 2017, real GDP growth was projected to slow toward, but to re-main above, the rate of growth of potential output. The expansion in economic activity over the medium term was expected to lead to a gradual reduction in resource slack; the unemployment rate was projected to decline slowly and to move a little 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 up a little, reflecting the slightly higher-than-expected recent monthly data on core consumer prices and a path for crude oil prices that was a bit higher than in the previous projection. The medium-term forecast for inflation was little changed, with inflation in 2016 and 2017 projected to move closer to, but remain below, the Committee’s longer-run objective of 2 percent, as energy prices were expected to rise, import prices to turn up, and resource utilization to tighten further. Thereafter, inflation was anticipated to move back to 2 percent, with inflation expectations in the longer run assumed to be consistent with the Committee’s objective and slack in labor and product markets projected to have waned.
"The staff viewed the uncertainty around its April projections for real GDP growth, the unemployment rate, and inflation as similar to the average of the past 20 years. The risks to the forecast for real GDP and inflation were seen as tilted to the downside, reflecting the staff’s assessment that neither monetary nor fiscal policy appeared well positioned to help the economy withstand substantial adverse shocks. At the same time, the staff viewed the risks around its outlook for the unemployment rate as roughly balanced."
MARCH 17-18 FOMC: Minutes released on April 8:
"In the U.S. economic forecast prepared by the staff for
the March FOMC meeting, projected real GDP growth in the first half of this year was lower than in the forecast prepared for the January meeting, largely reflecting downward revisions to the near-term forecasts for household spending, net exports, and residential investment.
"The staff’s medium-term forecast for real GDP growth also was revised down, mostly because of the effects of a higher projected path for the foreign exchange value of the dollar. Nonetheless, the staff continued to
forecast that real GDP would expand at a faster pace than potential output in 2015 and 2016, supported by increases in consumer and business confidence and a small pickup in foreign economic growth, even as the normalization of monetary policy was assumed to begin.
"In 2017, real GDP growth was projected to slow toward, but to remain above, the rate of potential output growth. The expansion in economic activity over the medium term was anticipated to gradually reduce resource slack; the unemployment rate was expected to decline slowly and to temporarily move a little below the staff’s estimate of its longer-run natural rate. In its medium-term and longer-run projections, the staff slightly lowered its assumptions for potential GDP growth and real equilibrium interest rates.
"The staff’s forecast for inflation in the near term was little
changed, with the large declines in energy prices since last June still anticipated to lead to a temporary decrease in the 12-month change in total PCE prices in the first half of this year. The staff’s forecast for inflation in 2016 and 2017 was unchanged, as energy prices and non-oil import prices were still expected to bottom out and begin rising later this year; inflation was projected to move closer to, but remain below, the Committee’s longer-run objective of 2 percent over those years. Inflation
was anticipated to move back to 2 percent thereafter, with inflation expectations in the longer run assumed to be consistent with the Committee’s objective and slack in labor and product markets projected to have waned.
The staff viewed the extent of uncertainty around its March projections for real GDP growth, the unemployment rate, and inflation as similar to the average over the past 20 years. The risks to the forecasts 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."
JAN 27-28 FOMC: Minutes released on Feb. 20:
"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."
(Reuters Washington Newsroom)
