February 18, 2009
Minutes of Federal Open Market Committee, January 16 and January 27-28, 2009
For release at 2:00 p.m. EST
The Federal Reserve on Wednesday released, for the first time, longer-run economic projections made by Federal Open Market Committee (FOMC) participants--the Federal Reserve Board members and Federal Reserve Bank presidents--in connection with their regular quarterly projections.
Since November 2007, the Federal Reserve has been publishing a quarterly Summary of Economic Projections (SEP), which has included projections typically up to a three-year horizon. The latest SEP, in addition to projections for 2009, 2010, and 2011, includes longer-run projections for output growth, unemployment, and inflation.
The 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 absent further shocks to the economy. "Appropriate monetary policy" is defined as the future policy deemed most likely to foster outcomes satisfying the Federal Reserve's dual mandate of maximum employment and price stability.
The longer-run projections for output growth and unemployment may be interpreted as the estimates of FOMC participants of the rate of growth of output and the unemployment rate that appear to be sustainable in the long run, taking into account important influences such as the trend growth rates of productivity and the labor force, improvements in worker education and skills, the efficiency of the labor market at matching workers and jobs, government policies affecting technological development or the labor market, and other factors. The longer-run projections of inflation may be interpreted as the rates that each Federal Reserve Board member and Federal Reserve Bank president sees as most consistent with achieving the dual objectives of maximum employment and price stability.
The central tendency of FOMC participants' longer-run projections, submitted for the Committee's January 27-28 meeting, were:
- 2.5 to 2.7 percent growth in real gross domestic output
- 4.8 to 5.0 percent unemployment
- 1.7 to 2.0 percent inflation, as measured by the price index for personal consumption expenditures (PCE).
Most participants judged that a longer-run PCE inflation rate of 2 percent would be consistent with the dual mandate; others indicated that 1-1/2 or 1-3/4 percent inflation would be appropriate.
The longer-term economic projections are discussed in the SEP, which is published four times each year along with minutes of the Committee's meetings. The SEP, minutes of the Committee's January 27-28 meeting, and January 16 conference call are attached.
The minutes for each of the Committee's eight regularly scheduled meetings each year are made available three weeks after the day of the policy decision and subsequently are published in the Board's Annual Report. The descriptions of economic and financial conditions contained in the minutes and in the SEP are based solely on the information that was available to
the Committee at the time of the meeting.
The FOMC minutes can be viewed on the Board's website at http://www.federalreserve.gov/monetarypolicy/fomccalendars.htm.