The FOMC is expected to release updated projections at the meeting this week (this is not certain). The FOMC didn’t release projections in March due to economic uncertainty related to the impact of COVID-19.
For review, here are the last FOMC projections released in December. Since the last projections were released, the economic world has changed dramatically – coming to a sudden stop in March – and the projections for 2020 and 2021 will change significantly.
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|
|Dec 2019||2.0 to 2.2||1.8 to 2.0||1.8 to 2.0|
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|
|Dec 2019||3.5 to 3.7||3.5 to 3.9||3.5 to 4.0|
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|
|Dec 2019||1.8 to 1.9||2.0 to 2.1||2.0 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|
|Dec 2019||1.9 to 2.0||2.0 to 2.1||2.0 to 2.2|