Factbox - Fed staff forecasts from FOMC minutes

(Reuters) - The following are the Federal Reserve's staff forecasts as contained in the minutes of recent Federal Open Market Committee meetings: JAN 27-28 FOMC: Minutes released on Feb. 18: "The staff estimated that real GDP growth in the second half of 2014 was faster than in the projection prepared for the December meeting, primarily reflecting stronger-than-expected consumer spending. Even so, real GDP was still estimated to have risen more slowly in the fourth quarter than in the third quarter, as changes in both net exports and federal government purchases appeared likely to have subtracted from real GDP growth in the fourth quarter following large positive contributions in the previous quarter. "The staff’s outlook for economic activity over the first half of 2015 was revised up since December, in part reflecting an anticipated boost to consumer spending from declines in energy prices. However, the forecast for real GDP growth over the medium term was little revised, as the greater momentum implied by recent spending gains and the support to household spending from lower energy prices was about offset by the restraint implied by the recent appreciation of the dollar. The staff continued to forecast that real GDP would expand at a modestly faster pace in 2015 and 2016 than it did in 2014 and that it would rise more quickly than potential output, supported by increases in consumer and business confidence and a pickup in foreign economic growth, as well as by a U.S. monetary policy stance that was assumed to remain highly accommodative for some time. In 2017, real GDP growth was projected to begin slowing toward, but to remain slightly above, the rate of growth of potential output. The expansion in economic activity over the medium term was anticipated to lead to a slow reduction in resource slack, and the unemployment rate was expected to decline gradually and to move slightly below the staff’s estimate of its longer-run natural rate for a time. "The staff’s forecast for inflation in the near term was revised down, as further sharp declines in crude oil prices since the December FOMC meeting pointed toward a somewhat larger transitory decrease in the total PCE price index early this year than was previously projected. In addition, the incoming data on consumer prices apart from those for energy showed a somewhat smaller rise than anticipated. The staff’s forecast for inflation in 2016 and 2017 was essentially unchanged, with inflation projected to remain below the Committee’s 2 percent objective. Nevertheless, inflation was projected to reach 2 percent over time, with inflation expectations in the longer run assumed to be consistent with the Committee’s objective and slack in labour and product markets anticipated to fade. "The staff viewed the uncertainty around its projections for real GDP growth, the unemployment rate, and inflation as similar to the average over the past 20 years. The risks to the forecast for real GDP growth were viewed as tilted a little to the downside, reflecting the staff’s assessment that neither monetary policy nor fiscal policy was well positioned to help the economy withstand adverse shocks. At the same time, the staff viewed the risks around its outlook for the unemployment rate as roughly balanced. The downside risks to the forecast for inflation were seen as having increased somewhat, partly reflecting the recent soft monthly readings on core inflation." DEC 16-17 FOMC: Minutes released on Jan. 7: "In the staff forecast prepared for the December FOMC meeting, real GDP growth in the second half of 2014 was higher than in the projection for the October meeting, largely reflecting stronger-than-expected data for PCE. Nevertheless, real GDP growth was anticipated to slow in the fourth quarter as both net exports and federal government purchases — important positive contributors to real GDP growth in the third quarter—were anticipated to drop back. The staff’s medium-term forecast for real GDP growth was revised up a little on net. The projected path for oil prices was lower, and the trajectory for equity prices was a bit higher. And although the projected path of the dollar was revised up, the staff revised down its estimate of how much the appreciation of the dollar since last summer would restrain projected growth in real GDP. The staff continued to forecast that real GDP would expand at a faster pace in 2015 and 2016 than it had this year and that it would rise more quickly than potential output, supported by increases in consumer and business confidence and a pickup in foreign economic growth, along with monetary policy that was assumed to remain highly accommodative for some time. In 2017, real GDP growth was projected to begin slowing toward, but to remain above, the rate of potential output growth as the normalization of monetary policy was assumed to proceed. The expansion in economic activity over the medium term was anticipated to slowly reduce resource slack, and the unemployment rate was expected to decline gradually and to temporarily move slightly below the staff’s estimate of its longer-run natural rate. "The staff’s forecast for inflation in the near term was revised down to reflect the further large energy price declines since the October FOMC meeting, which were anticipated to lead to a temporary decrease in the total PCE price index late this year and early next year. The staff’s inflation projection for the next few years was essentially unchanged; the staff continued to project that inflation would move up gradually toward, but run somewhat below, the Committee’s longer-run objective of 2 percent. Nevertheless, inflation was projected to reach the Committee’s objective over time, with longer-run inflation expectations assumed to remain stable, prices of energy and non-oil imports forecast to begin rising next year, and slack in labour and product markets anticipated to diminish slowly. "The staff viewed the uncertainty around its projections for real GDP growth, the unemployment rate, and inflation as similar to the average over the past 20 years. The risks to the forecast for real GDP growth and inflation were viewed as tilted a little to the downside, reflecting the staff’s assessment that neither monetary policy nor fiscal policy was well positioned to help the economy withstand adverse shocks. At the same time, the staff viewed the risks around its outlook for the unemployment rate as roughly balanced." OCT 28-29 FOMC: Minutes released on Nov. 19: "The information on economic activity received since the staff prepared its forecast for the September FOMC meeting was close to expectations, and therefore, the staff’s projection for real GDP growth over the remainder of the year was little revised. However, in response to a further rise in the foreign exchange value of the dollar, a deterioration in global growth prospects, and a decline in equity prices, the staff revised down its projection for real GDP growth a little over the medium term. Even with the slower expansion of economic activity in this projection, real GDP was still expected to rise faster than potential output in 2015 and 2016, supported by accommodative monetary policy and a further easing of the restraint on spending from changes in fiscal policy; in 2017, real GDP growth was projected to step down toward the rate of potential output growth. As a result, resource slack was anticipated to decline steadily, albeit at a slightly slower rate than in the previous projection, and the unemployment rate was expected to gradually improve and to be at the staff’s estimate of its longer run natural rate in 2017. "The staff’s forecast for inflation this quarter and early next year was reduced in response to further declines in crude oil prices, but the forecast for inflation over the medium term was only a touch lower. Consumer price inflation was projected to be lower in the second half of this year than in the first half and to remain below the Committee’s longer-run objective of 2 percent over the next few years. With resource slack projected to diminish slowly and changes in commodity and import prices anticipated to be subdued, inflation was projected to rise gradually and to reach the Committee’s objective in the longer run. "The staff continued to view the uncertainty around its projections for real GDP growth, the unemployment rate, and inflation as similar to the average over the past 20 years. The risks to the forecast for real GDP growth and inflation were seen as tilted to the downside, reflecting recent financial developments and concerns about the foreign economic outlook, as well as the staff’s assessment that neither monetary policy nor fiscal policy appeared well positioned to help the economy withstand adverse shocks. At the same time, the staff continued to view the risks around its outlook for the unemployment rate as roughly balanced." SEPT 16-17 FOMC: Minutes released on Oct. 8: "In the economic forecast prepared by the staff for the September FOMC meeting, the projection for growth in real gross domestic product (GDP) in the second half of this year was revised down slightly from the one prepared for the previous meeting, primarily because of a somewhat weaker near-term outlook for consumer spending. The staff’s medium-term forecast for real GDP was also revised down a little, reflecting a higher projected path for the foreign exchange value of the dollar along with slightly smaller projected gains for home prices. The staff still anticipated that the pace of real GDP growth in 2015 and 2016 would exceed the growth rate of potential output, supported by continued increases in consumer and business confidence, the further easing of the restraint on spending from changes in fiscal policy, additional improvements in credit availability, and a pickup in foreign economic growth. In 2017, real GDP growth was projected to begin slowing toward, but to remain above, the rate of potential output growth. The expansion in economic activity over the projection period was anticipated to steadily reduce resource slack, and the unemployment rate was expected to decline gradually and temporarily move slightly below the staff’s estimate of its longer-run natural rate toward the end of the period. "The staff’s near-term forecast for inflation was a little lower than the projection prepared for the previous FOMC meeting, reflecting recent readings on core consumer price inflation that were lower than anticipated and declines in oil prices that were faster than expected, but the forecast for inflation over the medium term was little changed. The staff continued to project inflation to be lower in the second half of this year than in the first half and to remain below the Committee’s longer run objective of 2 percent over the next few years. With longer-term inflation expectations assumed to remain stable, resource slack projected to diminish slowly, and changes in commodity and import prices expected to be subdued, inflation was projected to rise gradually and to reach the Committee’s objective in the longer run. Overall, the staff’s economic projection for the September meeting was quite similar to the forecast presented at the June meeting, when the FOMC last prepared a Summary of Economic Projections (SEP). The staff’s September projection showed a slightly higher path for the unemployment rate, a bit lower real GDP growth, and essentially no change to inflation compared with its June forecast. "The staff continued to view the uncertainty around its projections for real GDP growth, the unemployment rate, and inflation as similar to the average over the past 20 years. The risks to the forecast for real GDP growth were still seen as tilted a little to the downside, as neither monetary policy nor fiscal policy was viewed as well positioned to help the economy withstand adverse shocks. At the same time, the staff viewed the risks around its outlook for the unemployment rate and for inflation as roughly balanced."