May 24, 2017 / 6:29 PM / 3 months ago

Factbox: Fed staff forecasts from FOMC minutes

(Reuters) - The following are the Federal Reserve's staff forecasts as contained in the minutes of recent Federal Open Market Committee meetings:

For a full text, see here fomccalendars.htm

MAY 2-3 FOMC: Minutes released on May 24:

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

the May FOMC meeting, real GDP growth was projected

to bounce back in the second quarter from its

weak first-quarter reading. The staff judged that the

weakness in first-quarter real GDP was probably not attributable

to residual seasonality and that it instead reflected

transitorily soft consumer expenditures and inventory

investment. Importantly, PCE growth was expected

to pick up to a stronger pace in the spring, which

would be more consistent with ongoing gains in employment,

real disposable personal income, and households’

net worth. In addition, the sharp decrease in the contribution

to GDP growth from the change in inventory investment

in the first quarter was not expected to be repeated.

Beyond the near term, the forecast for real GDP

growth was a little stronger, on net, than in the previous

projection, mostly due to the effect of a somewhat lower

assumed path for the exchange value of the dollar. The

staff continued to project that real GDP would expand

at a modestly faster pace than potential output in

2017 through 2019, supported in part by the staff’s

maintained assumption that fiscal policy would become

more expansionary in the coming years. The unemployment

rate was projected to decline gradually over the

next couple of years and to run somewhat below the

staff’s estimate of its longer-run natural rate over this period;

the staff’s estimate of the natural rate was revised

down slightly in this forecast.

"The staff’s forecast for consumer price inflation, as

measured by changes in the PCE price index, was revised

down marginally for 2017 as a whole after incorporating

the soft data on consumer prices for March, but

it was essentially unrevised thereafter. Inflation was still

expected to be somewhat higher this year than last year,

reflecting an upturn in the prices for food and

non-energy imports as well as a slightly faster increase in

energy prices. The staff continued to project that inflation

would increase gradually in 2018 and 2019 and that

it would be marginally below the Committee’s longer-run

objective of 2 percent in 2019.

"The staff viewed the uncertainty around its 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 were seen as tilted to

the downside, primarily reflecting the staff’s assessment

that monetary policy appeared to be better positioned to

respond to large positive shocks to the economic outlook

than to substantial adverse ones. However, the

staff viewed the risks to the forecast as less pronounced

than late last year, with both somewhat diminished risks

to the foreign outlook and an increase in U.S. consumer

and business confidence. Consistent with the downside

risks to aggregate demand, the staff viewed the risks to

its outlook for the unemployment rate as tilted to the

upside. The risks to the projection for inflation were

judged to be roughly balanced. The downside risks from

the possibility that longer-term inflation expectations

may have edged down or that the dollar could appreciate

substantially were seen as roughly counterbalanced by

the upside risk that inflation could increase more than

expected in an economy that was projected to continue

operating above its longer-run potential."

MARCH 14-15 FOMC: Minutes released on April 5:

"In the U.S. economic projection prepared by the staff

for the March FOMC meeting, the near-term forecast

for real GDP growth was a little weaker, on net, than in

the previous projection. Real GDP was expected to expand

at a slower rate in the first quarter than in the

fourth quarter, reflecting some data for January that

were judged to be transitorily weak, but growth was projected

to move back up in the second quarter. The staff

maintained its assumption -— provisionally included starting

with the December 2016 forecast -— of a more expansionary

fiscal policy in the coming years, but it pushed

back the timing of when those policy changes were anticipated

to take effect. The negative effect of this timing

change on projected real GDP growth through 2019 was

offset by a higher assumed path for equity prices and by

a lower assumed path for the exchange value of the dollar.

All told, the staff’s forecast for the level of real GDP

at the end of 2019 was essentially unrevised from the

previous forecast, and the staff continued to project that

real GDP would expand at a modestly faster pace than

potential output in 2017 through 2019. The unemployment

rate was forecast to edge down gradually through

the end of 2019 and to run below the staff’s estimate of

its longer-run natural rate; the path for the unemployment

rate was little changed from the previous projection.

"The staff’s forecast for consumer price inflation, as

measured by changes in the PCE price index, was unchanged

for 2017 as a whole and over the next couple of

years. The staff continued to project that inflation

would increase gradually over this period, as food and

energy prices, along with the prices of non-energy imports,

were expected to begin steadily rising this year.

However, inflation was projected to be slightly below the

Committee’s longer-run objective of 2 percent in 2019.

"The staff viewed the uncertainty around its 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 were seen as tilted to

the downside, primarily reflecting the staff’s assessment

that monetary policy appeared to be better positioned to

respond to large positive shocks to the economic outlook

than substantial adverse ones. However, the staff

viewed the risks to the forecast as less pronounced than

in the recent past, reflecting both somewhat diminished

risks to the foreign outlook and an increase in U.S. consumer

and business confidence over recent months.

Consistent with the downside risks to aggregate demand,

the staff viewed the risks to its outlook for the unemployment

rate as tilted to the upside. The risks to the

projection for inflation were seen as roughly balanced.

The downside risks from the possibility that longer-term

inflation expectations may have edged down or that the

dollar could appreciate substantially further were seen as

roughly counterbalanced by the upside risk that inflation

could increase more than expected in an economy that

was projected to continue operating above its longer-run

potential."

JAN. 31-FEB. 1 FOMC: Minutes released on Feb. 22:

"In the U.S. economic projection prepared by the staff

for this FOMC meeting, the near-term forecast was little

changed from the December meeting. Real GDP

growth in the fourth quarter of last year was estimated

to have been a little faster than the staff had expected in

December, and the pace of economic growth in the first

half of this year was projected to be essentially the same

as in the fourth quarter. The staff’s forecast for real

GDP growth over the next several years was little

changed. The staff continued to project that real GDP

would expand at a modestly faster pace than potential

output in 2017 through 2019. The unemployment rate

was forecast to edge down gradually through the end of

2019 and to run below the staff’s estimate of its longer-run

natural rate; the path for the unemployment rate was

little changed from the previous projection.

"The staff’s forecast for consumer price inflation was unchanged

on balance. The staff continued to project that

inflation would increase over the next several years, as

food and energy prices, along with the prices of non-energy

imports, were expected to begin steadily rising either

this year or next. However, inflation was projected

to be marginally below the Committee’s longer-run objective

of 2 percent in 2019.

"The staff viewed the uncertainty around its 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 were seen as tilted to

the downside, primarily reflecting the staff’s assessment

that monetary policy appeared to be better positioned to

offset large positive shocks than substantial adverse

ones. However, the staff viewed the risks to the forecast

from developments abroad as less pronounced than in

the recent past. Consistent with the downside risks to

aggregate demand, the staff viewed the risks to its outlook

for the unemployment rate as tilted to the upside.

The risks to the projection for inflation were seen as

roughly balanced. The downside risks from the possibility

that longer-term inflation expectations may have

edged down or that the dollar could appreciate substantially

further were seen as roughly counterbalanced by

the upside risk that inflation could increase more than

expected in an economy that was projected to continue

operating above its longer-run potential."

DEC. 13-14 FOMC: Minutes released on Jan. 4:

"In the U.S. economic projection prepared by the staff

for the December FOMC meeting, the near-term forecast

was little changed from the projection prepared for

the November meeting. Real GDP growth in the second

half of 2016 was still expected to be faster than in

the first half. The staff’s forecast for real GDP growth

over the next several years was slightly higher, on balance,

largely reflecting the effects of the staff’s provisional

assumption that fiscal policy would be more expansionary

in the coming years. These effects were substantially

counterbalanced by the restraint from the

higher assumed paths for longer-term interest rates and

the foreign exchange value of the dollar. The staff projected

that real GDP would expand at a modestly faster

pace than potential output in 2017 through 2019. The

unemployment rate was forecast to edge down gradually,

on net, and to continue to run below the staff’s estimate

of its longer-run natural rate through the end of 2019;

the path for the unemployment rate was a little lower

than in the previous projection.

"The near-term forecast for consumer price inflation was

somewhat higher than in the previous projection, reflecting

recent increases in energy prices. Beyond the

near term, the inflation forecast was little revised. The

staff continued to project that inflation would edge up

over the next several years, as food and energy prices

along with the prices of non-energy imports were expected

to begin steadily rising in 2017. However, inflation

was projected to be marginally below the Committee’s

longer-run objective of 2 percent in 2019.

"The staff viewed the uncertainty around its 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 were seen as tilted to

the downside, reflecting the staff’s assessment that monetary

policy appeared to be better positioned to offset

large positive shocks than substantial adverse ones. In

addition, the staff continued to see the risks to the forecast

from developments abroad as skewed to the downside.

Consistent with the downside risks to aggregate

demand, the staff viewed the risks to its outlook for the

unemployment rate as tilted to the upside. The risks to

the projection for inflation were seen as roughly balanced.

The downside risks from the possibility that

longer-term inflation expectations may have edged lower

or that the dollar could appreciate more than anticipated

were seen as roughly counterbalanced by the upside risk

that inflation could increase more than expected in an

economy that was projected to continue operating above

its long-run potential."

Reuters Washington Newsroom, 202 898 8310

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