Factbox: Fed staff forecasts from FOMC minutes

OCT 27-28 FOMC: Minutes released on Nov. 18:

"In the economic forecast prepared by the staff for the October FOMC meeting, real GDP growth in the second half of this year was a little lower, on balance, than in the projection for the September meeting, largely reflecting a downward revision to estimated inventory in-vestment. The staff’s medium-term projection for real GDP growth was essentially unrevized from the previous forecast. The staff continued to project that real GDP would expand at a somewhat faster pace than potential output from 2016 through 2018, supported primarily by increases in consumer spending. The unemployment rate was expected to decline gradually and to run a little below the staff’s estimate of its longer-run natural rate over this period.

"The staff’s forecast for inflation in the near term was revised up a little, reflecting recent data, and it was unrevized over the medium term. Energy prices and prices of non-energy imported goods were expected to begin steadily rising next year. The staff projected that inflation would increase 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. 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 uncertainty around its October 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, the staff viewed the risks to its outlook for the unemployment rate as tilted to the upside."

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 unrevized 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 xpansion 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 unrevized 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."

NOTE:

For a full text, see http://www.federalreserve.gov/monetarypolicy/fomccalendars.htm

((Reuters Washington Newsroom, 202 898 8310))