Wednesday, March 19, 2014

FOMC Projections and Press Conference

by Bill McBride on 3/19/2014 02:15:00 PM

The key sentence in the announcement was: "The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run."

Rates will be low for a long long time ...

As far as the "Appropriate timing of policy firming",  participant views were mostly unchanged (almost all participants expect the first rate increase in 2015).

Yellen press conference here.

On the projections, GDP was revised down slightly, the unemployment rate was revised down again, and inflation projections were mostly unchanged. 

GDP projections of Federal Reserve Governors and Reserve Bank presidents
Change in Real GDP1201420152016
Mar 2014 Meeting Projections2.8 to 3.03.0 to 3.22.5 to 3.0
Dec 2013 Meeting Projections2.8 to 3.23.0 to 3.42.5 to 3.2
1 Projections of change in real GDP and inflation are from the fourth quarter of the previous year to the fourth quarter of the year indicated.

The unemployment rate was at 6.7% in February. 

Unemployment projections of Federal Reserve Governors and Reserve Bank presidents
Unemployment Rate2201420152016
Mar 2014 Meeting Projections6.1 to 6.35.6 to 5.95.2 to 5.6
Dec 2013 Meeting Projections6.3 to 6.65.8 to 6.15.3 to 5.8
2 Projections for the unemployment rate are for the average civilian unemployment rate in the fourth quarter of the year indicated.

As of January, PCE inflation was up 1.2% from January 2012, and core inflation was up 1.1%.  The FOMC expects inflation to increase in 2014, but remain below their 2% target (Note: the FOMC target is symmetrical around 2%, so this is about the same miss as 2.9% inflation). 

Inflation projections of Federal Reserve Governors and Reserve Bank presidents
PCE Inflation1201420152016
Mar 2014 Meeting Projections1.5 to 1.61.5 to 2.01.7 to 2.0
Dec 2013 Meeting Projections1.4 to 1.61.5 to 2.01.7 to 2.0

Here are the FOMC's recent core inflation projections:

Core Inflation projections of Federal Reserve Governors and Reserve Bank presidents
Core Inflation1201420152016
Mar 2014 Meeting Projections1.4 to 1.61.7 to 2.01.8 to 2.0
Dec 2013 Meeting Projections1.4 to 1.61.6 to 2.01.8 to 2.0

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