Wednesday, December 18, 2013

FOMC Projections and Press Conference

by Calculated Risk on 12/18/2013 02:13:00 PM

The key sentences in the announcement were: "In light of the cumulative progress toward maximum employment and the improvement in the outlook for labor market conditions, the Committee decided to modestly reduce the pace of its asset purchases. Beginning in January, the Committee will add to its holdings of agency mortgage-backed securities at a pace of $35 billion per month rather than $40 billion per month, and will add to its holdings of longer-term Treasury securities at a pace of $40 billion per month rather than $45 billion per month."

And on forward guidance: "The Committee now anticipates, based on its assessment of these factors, that it likely will be appropriate to maintain the current target range for the federal funds rate well past the time that the unemployment rate declines below 6-1/2 percent, especially if projected inflation continues to run below the Committee's 2 percent longer-run goal."

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

As far as the "Appropriate timing of policy firming", the participants moved out a little with three participants now seeing the first increase in 2016.

Bernanke press conference here or watch below. 



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On the projections, GDP was mostly unrevised, the unemployment rate was revised down slightly, and inflation was revised down. 

GDP projections of Federal Reserve Governors and Reserve Bank presidents
Change in Real GDP12013201420152016
Dec 2013 Meeting Projections2.2 to 2.32.8 to 3.23.0 to 3.42.5 to 3.2
Sept 2013 Meeting Projections2.0 to 2.32.9 to 3.13.0 to 3.52.5 to 3.3
June 2013 Meeting Projections2.3 to 2.63.0 to 3.52.9 to 3.6  
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.

The unemployment rate was at 7.0% in November. 

Unemployment projections of Federal Reserve Governors and Reserve Bank presidents
Unemployment Rate22013201420152016
Dec 2013 Meeting Projections7.0 to 7.16.3 to 6.65.8 to 6.15.3 to 5.8
Sept 2013 Meeting Projections7.1 to 7.36.4 to 6.85.9 to 6.25.4 to 5.9
June 2013 Meeting Projections7.2 to 7.3 6.5 to 6.85.8 to 6.2
2 Projections for the unemployment rate are for the average civilian unemployment rate in the fourth quarter of the year indicated.

The FOMC believes inflation will stay significantly below target.

Inflation projections of Federal Reserve Governors and Reserve Bank presidents
PCE Inflation12013201420152016
Dec 2013 Meeting Projections0.9 to 1.01.4 to 1.61.5 to 2.01.7 to 2.0
Sept 2013 Meeting Projections1.1 to 1.21.3 to 1.81.6 to 2.01.7 to 2.0
June 2013 Meeting Projections0.8 to 1.21.4 to 2.01.6 to 2.0

Here is core inflation:

Core Inflation projections of Federal Reserve Governors and Reserve Bank presidents
Core Inflation12013201420152016
Dec 2013 Meeting Projections1.1 to 1.21.4 to 1.61.6 to 2.01.8 to 2.0
Sept 2013 Meeting Projections1.2 to 1.31.5 to 1.71.7 to 2.01.9 to 2.0
June 2013 Meeting Projections1.2 to 1.31.5 to 1.81.7 to 2.0