Part 3: Summary of Economic Projections

Monetary Policy Report submitted to the Congress on July 5, 2019, pursuant to section 2B of the Federal Reserve Act

In conjunction with the Federal Open Market Committee (FOMC) meeting held on June 18–19, 2019, meeting participants submitted their projections of the most likely outcomes for real gross domestic product (GDP) growth, the unemployment rate, and inflation for each year from 2019 to 2021 and over the longer run. Each participant's projections were based on information available at the time of the meeting, together with his or her assessment of appropriate monetary policy—including a path for the federal funds rate and its longer-run value—and assumptions about other factors likely to affect economic outcomes.19 The longer-run projections represent each participant's assessment of the value to which each variable would be expected to converge, over time, under appropriate monetary policy and in the absence of further shocks to the economy.20 "Appropriate monetary policy" is defined as the future path of policy that each participant deems most likely to foster outcomes for economic activity and inflation that best satisfy his or her individual interpretation of the statutory mandate to promote maximum employment and price stability.

Participants who submitted longer-run projections generally expected that, under appropriate monetary policy, growth of real GDP in 2019 would run at or somewhat above their individual estimates of its longer-run rate. Thereafter, almost all participants expected real GDP growth to edge down, with the vast majority of participants projecting growth in 2021 to be at or below their estimates of its longer-run rate. All participants who submitted longer-run projections continued to expect that the unemployment rate would run at or below their estimates of its longer-run level through 2021. Compared with the Summary of Economic Projections (SEP) from March 2019, most participants revised down slightly their projections for the unemployment rate from 2019 through 2021. All participants marked down somewhat their projections for 2019 for total inflation, as measured by the four-quarter percent change in the price index for personal consumption expenditures (PCE), and almost all did so for their projections for core inflation. All participants projected that inflation would increase in 2020 from 2019, and a majority expected another slight increase in 2021. The vast majority of participants expected that inflation would be at or slightly above the Committee's 2 percent objective in 2021. Core PCE price inflation was also projected to increase over the projection period, rising to 2.0 percent in 2021. Table 1 and figure 1 provide summary statistics for the projections.

Table 1. Economic projections of Federal Reserve Board members and Federal Reserve Bank presidents, under their individual assessments of projected appropriate monetary policy, June 2019

Percent

Variable Median1 Central tendency2 Range3
2019 2020 2021 Longer
run
2019 2020 2021 Longer
run
2019 2020 2021 Longer
run
Change in real GDP 2.1 2.0 1.8 1.9 2.0–2.2 1.8–2.2 1.8–2.0 1.8–2.0 2.0–2.4 1.5–2.3 1.5–2.1 1.7–2.1
March projection 2.1 1.9 1.8 1.9 1.9–2.2 1.8–2.0 1.7–2.0 1.8–2.0 1.6–2.4 1.7–2.2 1.5–2.2 1.7–2.2
Unemployment rate 3.6 3.7 3.8 4.2 3.6–3.7 3.5–3.9 3.6–4.0 4.0–4.4 3.5–3.8 3.3–4.0 3.3–4.2 3.6–4.5
March projection 3.7 3.8 3.9 4.3 3.6–3.8 3.6–3.9 3.7–4.1 4.1–4.5 3.5–4.0 3.4–4.1 3.4–4.2 4.0–4.6
PCE inflation 1.5 1.9 2.0 2.0 1.5–1.6 1.9–2.0 2.0–2.1 2.0 1.4–1.7 1.8–2.1 1.9–2.2 2.0
March projection 1.8 2.0 2.0 2.0 1.8–1.9 2.0–2.1 2.0–2.1 2.0 1.6–2.1 1.9–2.2 2.0–2.2 2.0
Core PCE inflation4 1.8 1.9 2.0   1.7–1.8 1.9–2.0 2.0–2.1   1.4–1.8 1.8–2.1 1.8–2.2  
March projection 2.0 2.0 2.0   1.9–2.0 2.0–2.1 2.0–2.1   1.8–2.2 1.8–2.2 1.9–2.2  
Memo: Projected
appropriate
policy path
                       
Federal funds rate 2.4 2.1 2.4 2.5 1.9–2.4 1.9–2.4 1.9–2.6 2.5–3.0 1.9–2.6 1.9–3.1 1.9–3.1 2.4–3.3
March projection 2.4 2.6 2.6 2.8 2.4–2.6 2.4–2.9 2.4–2.9 2.5–3.0 2.4–2.9 2.4–3.4 2.4–3.6 2.5–3.5

Note: Projections of change in real gross domestic product (GDP) and projections for both measures of inflation are percent changes from the fourth quarter of the previous year to the fourth quarter of the year indicated. PCE inflation and core PCE inflation are the percentage rates of change in, respectively, the price index for personal consumption expenditures (PCE) and the price index for PCE excluding food and energy. Projections for the unemployment rate are for the average civilian unemployment rate in the fourth quarter of the year indicated. Each participant's projections are based on his or her assessment of appropriate monetary policy. Longer-run projections represent each participant's assessment of the rate to which each variable would be expected to converge under appropriate monetary policy and in the absence of further shocks to the economy. The projections for the federal funds rate are the value of the midpoint of the projected appropriate target range for the federal funds rate or the projected appropriate target level for the federal funds rate at the end of the specified calendar year or over the longer run. The March projections were made in conjunction with the meeting of the Federal Open Market Committee on March 19–20, 2019. One participant did not submit longer-run projections for the change in real GDP, the unemployment rate, or the federal funds rate in conjunction with the March 19–20, 2019, meeting, and one participant did not submit such projections in conjunction with the June 18–19, 2019, meeting.

 1. For each period, the median is the middle projection when the projections are arranged from lowest to highest. When the number of projections is even, the median is the average of the two middle projections. Return to table

 2. The central tendency excludes the three highest and three lowest projections for each variable in each year. Return to table

 3. The range for a variable in a given year includes all participants' projections, from lowest to highest, for that variable in that year. Return to table

 4. Longer-run projections for core PCE inflation are not collected. Return to table

As shown in figure 2, about half of participants expected that the evolution of the economy, relative to their objectives of maximum employment and 2 percent inflation, would likely warrant keeping the federal funds rate at its current level through the end of 2019; the same number projected that a lower level for the federal funds rate would be appropriate by year-end. The medians of participants' assessments of the appropriate level of the federal funds rate in 2020 and 2021 were close to the median of their assessments of the longer-run federal funds rate level. Nearly all participants lowered their projections for the appropriate level of the federal funds rate, relative to March, at some point in the forecast period. Although nearly half of the participants revised their projections for 2019 to levels 25 basis points or 50 basis points below the current level, the median projection for the federal funds rate for the end of 2019 was unchanged. The medians for the federal funds rate for 2020 and 2021 were 50 basis points and 25 basis points lower than in March, respectively.

Most participants regarded the uncertainties around their forecasts for GDP growth, total inflation, and core inflation as broadly similar to the average of the past 20 years. About half of the participants viewed the level of uncertainty around their unemployment rate projections as being similar to the average of the past 20 years, and about the same number viewed uncertainty as higher. Participants' assessments of risks to their outlooks for output growth and the unemployment rate shifted notably relative to their assessments in March. As a result, most participants viewed the risks for GDP growth as weighted to the downside and the risks for the unemployment rate as weighted to the upside. About half of participants viewed the risks to inflation as being broadly balanced, with a similar number viewing inflation risks as being weighted to the downside.

A more complete description of the SEP will be released with the minutes of the June 18–19, 2019, FOMC meeting on July 10.

Footnotes

 19. Five members of the Board of Governors were in office at the time of the June FOMC meeting. Return to text

 20. One participant did not submit longer-run projections for real GDP growth, the unemployment rate, or the federal funds rate. Return to text

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Last Update: July 16, 2019