Sunday, March 12, 2017

Review of FOMC Projections

by Bill McBride on 3/12/2017 01:37:00 PM

The consensus is that the Fed will raise the Fed Funds Rate 25 bps following the FOMC meeting this coming week.

Since a rate hike is expected (and assuming it happens), the focus this month will be on the wording of the statement, the projections, and Fed Chair Janet Yellen's press conference.

Here are the December FOMC projections.  In general, the data has surprised somewhat to the upside since the December FOMC projections were released.

Projections for GDP in 2017 and 2018 might be revised up slightly.  My guess is, as far as the impact of fiscal stimulus, the Fed will wait and see what the actual proposals will be.

GDP projections of Federal Reserve Governors and Reserve Bank presidents
Change in
Real GDP1
201720182019
Dec 2016 1.9 to 2.31.8 to 2.21.8 to 2.0
Sept 2016 1.9 to 2.21.9 to 2.21.7 to 2.0
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 4.7% in February. So the unemployment rate for Q4 2017 might be revised down slightly.

Unemployment projections of Federal Reserve Governors and Reserve Bank presidents
Unemployment
Rate2
201720182019
Dec 2016 4.5 to 4.64.3 to 4.74.3 to 4.8
Sept 2016 4.5 to 4.74.4 to 4.74.4 to 4.8
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 1.9% from January 2016.  It appears inflation might be revised up slightly for 2017.

Inflation projections of Federal Reserve Governors and Reserve Bank presidents
PCE
Inflation1
201720182019
Dec 2016 1.7 to 2.01.9 to 2.02.0 to 2.1
Sept 2016 1.7 to 1.91.8 to 2.01.9 to 2.0

PCE core inflation was up 1.7% in January year-over-year.  Core PCE inflation might be revised up slightly for 2017.

Core Inflation projections of Federal Reserve Governors and Reserve Bank presidents
Core
Inflation1
201720182019
Dec 2016 1.8 to 1.91.9 to 2.02.0
Sept 2016 1.7 to 1.91.9 to 2.02.0

In general, it appears GDP and inflation might be revised up slightly, and the unemployment rate revised slightly lower.