Wednesday, June 10, 2020

FOMC Projections and Press Conference

by Calculated Risk on 6/10/2020 02:43:00 PM

Statement here.

Fed Chair Powell press conference video here starting at 2:30 PM ET.

Here are the projections.

GDP decreased at a 5.0% annual rate in Q1, and most forecasts are for an annual rate decline of 30% to 40% in Q2 - and for GDP to decline in 2020.

The course of the economy will depend on the course of the pandemic, so the FOMC has to factor in their expectations of when the pandemic will subside and end (and no one knows at this time).

GDP projections of Federal Reserve Governors and Reserve Bank presidents, Change in Real GDP1
Projection Date202020212022
June 2020-7.6 to -5.54.5 to 6.03.0 to 4.5
Dec 20192.0 to 2.21.8 to 2.01.8 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 13.3% in May.   The FOMC will revise up their Q4 2020 unemployment forecast significantly.   The FOMC projections for the unemployment rate at the end of 2020, 2021 and 2022 will be interesting.

Note that the unemployment rate doesn't remotely capture the economic damage to the labor market.  Not only were there 15+ million more people unemployed in May than at the end of 2019, but another 6+ million have left the labor force.   And close to 50% of households have seen a decline in income.

Unemployment projections of Federal Reserve Governors and Reserve Bank presidents, Unemployment Rate2
Projection Date202020212022
June 20209.0 to 10.05.9 to 7.54.8 to 6.1
Dec 20193.5 to 3.73.5 to 3.93.5 to 4.0
2 Projections for the unemployment rate are for the average civilian unemployment rate in the fourth quarter of the year indicated.

As of April 2020, PCE inflation was up 0.5% from April 2019.   With the economic stop in March, PCE inflation will be revised down significantly for Q4 2020.

Inflation projections of Federal Reserve Governors and Reserve Bank presidents, PCE Inflation1
Projection Date202020212022
June 20200.6 to 1.01.4 to 1.71.6 to 1.8
Dec 20191.8 to 1.92.0 to 2.12.0 to 2.2

PCE core inflation was up 1.0% in April year-over-year.    Core inflation will also be revised down for Q4 2020.

Core Inflation projections of Federal Reserve Governors and Reserve Bank presidents, Core Inflation1
Projection Date202020212022
June 20200.9 to 1.11.4 to 1.71.6 to 1.8
Dec 20191.9 to 2.02.0 to 2.12.0 to 2.2