Factbox: Fed staff forecasts from FOMC minutes

SEPT 16-17 FOMC: Minutes released on Oct. 8:

"The U.S. economic forecast prepared by the staff for the

September FOMC meeting was a little weaker, on balance,

than the one prepared for the July FOMC meeting.

Recent information on real U.S. economic activity was

generally stronger than expected, but equity prices declined,

the foreign exchange value of the dollar appreciated

further, and indicators of foreign economic growth

were generally weak. The staff left its forecast for real

GDP growth over the second half of the year little

changed but lowered its projection for economic growth

over the next several years. The staff also further

trimmed its assumptions for the rates of increase in

productivity and potential output over the medium term.

On net, the level of GDP was anticipated to rise above

its potential next year, and that gap was projected to

widen gradually over the medium term. The unemployment

rate was projected to run a little below the staff’s

estimate of its longer-run natural rate over this period.

"The staff projected that consumer price inflation would

move down over the near term by more than in the previous

projection. Crude oil prices declined further over

the intermeeting period and were expected to result in

lower consumer energy prices, and the effects of recent

dollar appreciation and lower commodity prices were

anticipated to push down non-oil import prices. With

energy prices and non-oil import prices expected to

begin to increase steadily next year, the staff projected

that inflation would rise gradually over the next several

years but would still be slightly below the Committee’s

longer-run objective of 2 percent at the end of 2018. Inflation

was anticipated to move up 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 uncertainty around its September

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 was well positioned to help the economy withstand

substantial adverse shocks. Consistent with this

downside risk to aggregate demand and with the further

adjustments to the staff’s supply-side assumptions, the

staff viewed the risks to its outlook for the unemployment

rate as tilted to the upside."

JULY 28-29 FOMC: Minutes released on Aug. 19:

"The U.S. economic forecast prepared by the staff for the July FOMC meeting was broadly similar to that prepared for the June FOMC meeting. Real GDP was again expected to increase faster in the second half of this year than in the first half and to expand more rapidly than potential output

in 2016 and 2017, even as the normalization of the stance of monetary policy was assumed to proceed. However, real GDP growth over the medium term was revised down a small amount, in part because of a slightly stronger forecast for the exchange value of the dollar. The staff also made two small adjustments to its supply-side assumptions. First, the projected rates of productivity gains and potential output growth over the medium term were trimmed. With actual and potential GDP growth both a bit weaker, the projected narrowing of the output gap over the medium term was little re-vised. Second, the staff lowered slightly its estimate of the longer-run natural rate of unemployment. The unemployment rate was expected to decline gradually to this revised estimate.

"The staff’s forecast for inflation was revised down, particularly in the near term, as the decline in crude oil prices over the intermeeting period was expected to result in lower consumer energy prices. Although energy prices and non-oil import prices were expected to begin rising steadily next year, the staff continued to project that inflation would be below the Committee’s longer-run objective of 2 percent over 2016 and 2017. Inflation was anticipated to move up gradually to 2 percent there-after, 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 July 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 was 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."

JUNE 16-17 FOMC: Minutes released on July 8:

"In the economic forecast prepared by the staff for the

June FOMC meeting, real GDP growth in the second

half of this year was expected to step up from its pace in

the first half. However, economic growth in the second

half was projected to be a little lower than in the projection

prepared for the April meeting, largely reflecting a

small downward revision to the forecast for household

spending. The staff’s medium-term projection for real

GDP growth was essentially unrevised from the previous

forecast. The staff continued to project that real

GDP would expand at a faster pace than potential output

in 2016 and 2017, supported primarily by increases

in consumer spending, even as the normalization of the

stance of monetary policy was assumed to proceed. The

expansion in economic output over the medium term

was anticipated to trim resource slack; the unemployment

rate was expected to decline gradually to the staff’s

estimate of its longer-run natural rate.

"The staff’s forecast for inflation in the near term was

little changed, and it was unrevised over the medium term.

Energy prices and non-oil import prices were expected

to begin steadily rising next year, but the staff projected

that inflation would continue to be below the Committee’s

longer-run objective of 2 percent over 2016 and

2017. However, inflation was anticipated to reach 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

June 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 seen 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 substantial adverse shocks.

At the same time, the staff saw the risks around its outlook

for the unemployment rate as roughly balanced."

APRIL 28-29 FOMC: Minutes released on May 20:

"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."