FOMC Statement and Projections

June 19, 2019

Today’s FOMC Statement downgraded the pace of economic activity to moderate but left the labor market assessment at strong. Personal consumption “appears to have picked up,” but business investment is still “soft.” As expected, forward guidance was modified, acknowledging increased uncertainties and replacing a stress on being patient with a promise to “act as appropriate to sustain the expansion, with a strong labor market and inflation near its symmetric 2% objective.” No change was made to the assessment of inflation. A surprise was that the vote wasn’t unanimous. St. Louis Fed President Bullard cast a vote to cut the 2.25-2.50% federal funds target by 25 basis points. This was the first dissenting vote of the Powell era and the first dissent since a pair of objections at the December 2017 FOMC majority decision to raise the target by 25 basis points. Those dissents by Evans and Kashkari were outnumbered by 7 votes in the majority.

Turning to the forecasts,

  • Growth next year was revised up 0.1 percentage point to 2.0%.
  • Projected unemployment was revised downward for this year, 2020, 2021, and even the longer run non-inflationary presumptive jobless level.
  • Total and core PCE inflation are now anticipated to be much lower this year and also below 2.0% next year.
  • The expected fed funds level at end-2021 was lowered by a half percentage point and in the longer term, too.

Copyright 2019, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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