Fed Forecasts Improve a Little

Following today's announcement from the FOMC that the Federal Reserve will begin another round of easing, the central bank has made a number of changes to its economic forecasts.

The June forecast projected 2012 GDP growth of 1.9% to 2.4%, which the Fed lowered today to 1.7% to 2.0%. But projections for 2013 and 2014 were raised, likely on the basis of the new easing regime. In 2013, the Fed now expects GDP growth of 2.5% to 3.0% compared with a June projection of 2.2% to 2.8%. In 2014, the Fed projects GDP growth of 3.0% to 3.8%, compared with the June projection of 3.0% to 3.5%.

The unemployment rate projection for 2012 was unchanged at 8.0% to 8.2%. In 2013 unemployment is now forecast at 7.6% to 7.9%, compared with a June forecast of 7.5% to 8.0%. For 2014 unemployment is now forecast at 6.7% to 7.3% compared a June forecast of 7.0% to 7.7%.

The Fed also made its first projections for 2015 today. GDP growth in 2015 is expected to be 3.0% to 3.8% and the unemployment rate is expected to be 6.0% to 6.8%.

The longer run forecast for GDP growth is 2.3% to 2.5% and the longer run projection for unemployment is 5.2% to 6.0%, both identical with June projections.

Neither personal consumption expenditures (PCE) inflation nor core inflation is forecast to rise above 2.0% through 2015, although the ranges have narrowed a bit. Some Fed board members had projected both PCE and core inflation to rise as high as 2.2% in 2014 and 2.3% in 2014.

Paul Ausick

Filed under: 24/7 Wall St. Wire, Banking & Finance, Economy Tagged: featured
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