New FOMC Projections

June 17, 2015

The Fed’s new forecasts cut projected growth ranges in 2015 but bump the ranges marginally higher for 2016 and 2017.  The forecast for unemployment in 2015 is now higher; that for 2016 was left the same, and that for 2017 has edged up marginally.  PCE inflation in 2015 and 2017 have the same predicted range as the FOMC had forecast previously in mid-March but a slightly lower estimate for 2016 that is below the 2.0% target.  Forecasts for core inflation are unchanged for 2015 and marginally higher for the following two years. 

The dot scatter diagram depicting where each FOMC member would like to see the fed funds target at year end shows the following:

  • End-2015:  No points are as high as 1.0% compared to four that were previously.  The median sees just one 25-basis point increase in the second half of this year.
  • End-2016: One member, presumably President Kocherlakota of the Minn. Fed district, prefers a rate below 0.5%, and a second policymakers wants such below 1.0%.  The median preference is 1.625%.
  • End-2017:  Everyone on the committee has a preference for an interest rate of at least 2.0%, and six would like it to be above 3.5%.  The median view of an appropriate end-year fed funds rate level is 3.0%.
  • Long-Run:  This forecast continues to have a median level of 3.625%.  Back in March, individual estimates ranged from 3.0% to 4.25%.  Now that range is from 3.25% to 4.25%.

Copyright 2015, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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