In addition to its blather about interest rates, the Fed also made numerous economic projections.
Please consider the Economic Projections of FOMC Participants under their individual assumptions of appropriate monetary policy, September 2020.
Fed’s GDP, Unemployment, PCE Inflation Projections
GDP Projection
The Fed believes GDP will only contract 3.7% in 2020 then rebound 4% in 2021, and 3% in 2022.
Do you believe this?
Unemployment Projection
The Fed believes the Unemployment Rate will be 7.6% in 2020, 5.5% in 2021, and 4.6% in 2022.
Do you believe this?
PCE Inflation Projection
The Fed believes Core Personal Consumption Expenditure inflation (excluding food and energy) will be 1.5% in 2020, 1.7% in 2021, and 1.8% in 2022.
Do you believe this?
GDP Poll
Unemployment Poll
PCE Poll
My Take
- GDP: I will take the under. Way under. Much of the rebound was due to $600 pandemic stimulus checks that expired on July 25. This will be a huge headwind going forward.
- Unemployment: I am leery of games with the participation rate and labor force but I will go with higher.
- PCE : This one is humorous. For months, the Fed has committed not only to 2% but letting inflation run hotter than expected for some time to make up for needed lost inflation. Yet the Fed admits it will not hit its targets until 2023. PCE inflation, as measured, is a joke. So perhaps the Fed is on target.
