Federal Open Market Committee
What do the policymakers forecast?
How far into the future do they forecast?
How are the "ranges" and "central tendencies" of projections defined in the summary table?
When are the projections collected?
Economic projections are collected from each member of the Board of Governors and each Federal Reserve Bank president four times a year, in connection with the Federal Open Market Committee's (FOMC’s) meetings in March, June, September, and December. Several charts and a table that summarize those projections are released at the Chairman's press conference within hours of the meeting. Three weeks later, more detailed information is provided in the Summary of Economic Projections, which is published with the minutes of the FOMC meeting.
The policymakers provide forecasts for economic growth, unemployment, and inflation. More specifically, the numbers that they provide for each of the years in their forecast are: the percent change in gross domestic product adjusted for inflation (real GDP), the unemployment rate, the percent change in the price index for personal consumption expenditures (PCE inflation), and the percent change in the price index for PCE excluding food and energy (core PCE inflation). Changes in real GDP and prices are measured from the fourth quarter of one year to the fourth quarter of the next. The unemployment rate is the average civilian unemployment rate in the fourth quarter of a year.
Beginning in January 2012, the economic projections also include information about policymakers' projections of appropriate monetary policy. Specifically, the projections include information about policymakers' projections of the appropriate level of the target federal funds rate--that is, the path that each policymaker judges likely to be most consistent with the Federal Reserve's statutory mandate to promote maximum employment and stable prices--in the fourth quarter of the current year and the next few calendar years, and over the longer run; the projections also report policymakers' current projections of the likely timing of the first increase in the target rate given their projections of future economic conditions. Additionally, an accompanying narrative describes the key factors underlying those assessments as well as qualitative information regarding policymakers’ expectations for the Federal Reserve's balance sheet.
The projections made in March and June are for the current year, for each of the next two years, and for the longer run. The projections made in September and December are for the current year, for each of the next three years, and for the longer run. The longer-run projections are the rates of growth, inflation, and unemployment to which a policymaker expects the economy to converge over time--maybe in five or six years--in the absence of further shocks and under appropriate monetary policy. Because appropriate monetary policy, by definition, is aimed at achieving the Federal Reserve's dual mandate of maximum employment and price stability in the longer run, policymakers' longer-run projections for economic growth and unemployment may be interpreted, respectively, as estimates of the economy's longer-run potential growth rate and the longer-run normal rate of unemployment; similarly, the longer-run projection of inflation is the rate of inflation which the FOMC judges to be most consistent with its dual mandate in the longer term.
The bottom of the range for each variable is the lowest of all of the projections for that year or period (for example, the PCE inflation rate in 2013). Likewise, the top of the range is the highest of all of the projections for that year or period. The central tendency--a narrower version of the range--excludes the three highest and three lowest projections for each variable in each year or period.
Initial projections are due by the end of the day on the Friday before the FOMC meeting. Policymakers may revise their projections at any time until the beginning of the session on the second day of the meeting. Once the projections are finalized, they are compiled into a summary table and several charts for the Chairman's press conference that afternoon.