Sunday, February 13, 2011

FOMC Minutes Preview

by Bill McBride on 2/13/2011 02:30:00 PM

Earlier:
• The busy economic schedule for the coming week.
Summary for Week ending February 12th

The minutes for the January FOMC meeting will be released on Wednesday. I'll be looking for any discussion of disagreement on QE2, any discussion of "tapering" off the QE2 purchases (something I think is likely), and also at the updated economic forecasts for GDP, unemployment and inflation.

I expect the FOMC to have revised up their GDP forecast for 2011, revise down their forecast for the Q4 2011 unemployment rate, and perhaps a small upward revision to their inflation forecast. The following table shows the November forecasts:

November Economic projections of Federal Reserve Governors
and Reserve Bank presidents
2010
Actual
201120122013
Change in Real GDP2.8%13.0 to 3.6%3.6 to 4.5%3.5 to 4.6%
June projections...3.5% to 4.2%3.5% to 4.5%n.a.
Unemployment Rate9.6%28.9 to 9.1%7.7 to 8.2%6.9 to 7.4%
June projections...8.3% to 8.7%7.1% to 7.5%n.a.
PCE Inflation 1.2%11.1 to 1.7%1.1 to 1.8%1.2 to 2.0%
June projections...1.1% to 1.6%1.0% to 1.7%n.a.
Core PCE Inflation 0.8%10.9 to 1.6%1.0 to 1.6%1.1 to 2.0%
June projections...0.9 to 1.3%1.0 to 1.5%n.a.

FOMC definitions:
1 Projections of change in real GDP and in inflation are from the fourth quarter of the previous year to the fourth quarter of the year indicated.
2 Projections for the unemployment rate are for the average civilian unemployment rate in the fourth quarter of the year indicated.

The table also includes the actual numbers for 2010. We can compare this to the January 2010 FOMC forecasts (not included in table).

Real GDP: Actual was 2.8%, and the January 2010 forecast range was for 2.8% to 3.5% - so this was at the low end of the range (thanks to a fairly strong Q4).

Unemployment: Actual in Q4 was 9.6%, and the January 2010 forecast range was for 9.5% to 9.7% - so this was right on.

PCE Inflation: Actual was 1.2%, and the January 2010 forecast range was for 1.4 to 1.7% - so this forecast was too high.

Core PCE Inflation: Actual was 0.8%, and the January 2010 forecast range was for 1.1 to 1.7% - so this forecast was also too high.

Overall the FOMC forecasts from January 2010 were pretty close.