FOMC Statement and Projections

June 16, 2021

The FOMC statement is almost identical to the previous one in late April, except that it acknowledges vaccination progress reducing the drag of Covid on the economy. However, the thought that some Covid risks continue was not dropped.

The most newsworthy part of the updated projections involves end-year forecasts for the appropriate federal funds target. In March, no change from the current 0% to 0.25% range was predicted until 2024. Now officials expect the onset of interest rate increases to occur during 2023 and for a total of 50 basis points of increase to be implemented that year.

Projected real GDP growth this year was bumped up half a percentage point to 7.0%. That for 2022 was left unchanged at 3.3%, and growth in 2023 was lifted 0.2 percentage points to 2.4%. The path for the unemployment rate was hardly modified and shows such below the 4.0% long-run tendency in both 2022 and 2023.

Projected PCE inflation underwent the largest revision, but the change involves almost entirely 2021. Officials kicked that forecast up a full percentage point to 3.4%, and raised the predictions for 2022 and 2023 by 0.1 percentage point each to 2.1% and 2.2%, which is consistent with the long-stated goal of letting inflation exceed the 2% target “for some time so that it averages 2% over time and longer-term inflation expectations remain well anchored at 2 percent.”

Copyright 2021, Larry Greenberg. All rights reserved. No secondary distribution without express permission.




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