sep · September 21, 2021
Summary of Economic Projections
For release at 2:00 p.m., EDT, September 22, 2021
Summary of Economic Projections
In conjunction with the Federal Open Market Committee (FOMC) meeting held on
September 21–22, 2021, 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 2021 to 2024 and over the longer run. Each
participant’sprojectionswerebasedoninformationavailableatthetimeofthemeeting,
together with her or his 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. 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. “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.
Page 1 of 17
For release at 2:00 p.m., EDT, September 22, 2021
Table 1. Economic projections of Federal Reserve Board members and Federal Reserve Bank presidents,
under their individual assumptions of projected appropriate monetary policy, September 2021
Percent
Median1 CentralTendency2 Range3
Variable 2021 2022 2023 2024 Longer 2021 2022 2023 2024 Longer 2021 2022 2023 2024 Longer
run run run
ChangeinrealGDP 5.9 3.8 2.5 2.0 1.8 5.8–6.0 3.4–4.5 2.2–2.5 2.0–2.2 1.8–2.0 5.5–6.3 3.1–4.9 1.8–3.0 1.8–2.5 1.6–2.2
Juneprojection 7.0 3.3 2.4 1.8 6.8–7.3 2.8–3.8 2.0–2.5 1.8–2.0 6.3–7.8 2.6–4.2 1.7–2.7 1.6–2.2
Unemploymentrate 4.8 3.8 3.5 3.5 4.0 4.6–4.8 3.6–4.0 3.3–3.7 3.3–3.6 3.8–4.3 4.5–5.1 3.0–4.0 2.8–4.0 3.0–4.0 3.5–4.5
Juneprojection 4.5 3.8 3.5 4.0 4.4–4.8 3.5–4.0 3.2–3.8 3.8–4.3 4.2–5.0 3.2–4.2 3.0–3.9 3.5–4.5
PCEinflation 4.2 2.2 2.2 2.1 2.0 4.0–4.3 2.0–2.5 2.0–2.3 2.0–2.2 2.0 3.4–4.4 1.7–3.0 1.9–2.4 2.0–2.3 2.0
Juneprojection 3.4 2.1 2.2 2.0 3.1–3.5 1.9–2.3 2.0–2.2 2.0 3.0–3.9 1.6–2.5 1.9–2.3 2.0
CorePCEinflation4 3.7 2.3 2.2 2.1 3.6–3.8 2.0–2.5 2.0–2.3 2.0–2.2 3.5–4.2 1.9–2.8 2.0–2.3 2.0–2.4
Juneprojection 3.0 2.1 2.1 2.9–3.1 1.9–2.3 2.0–2.2 2.7–3.3 1.7–2.5 2.0–2.3
Memo: Projected
appropriatepolicypath
Federalfundsrate 0.1 0.3 1.0 1.8 2.5 0.1 0.1–0.4 0.4–1.1 0.9–2.1 2.3–2.5 0.1 0.1–0.6 0.1–1.6 0.6–2.6 2.0–3.0
Juneprojection 0.1 0.1 0.6 2.5 0.1 0.1–0.4 0.1–1.1 2.3–2.5 0.1 0.1–0.6 0.1–1.6 2.0–3.0
Note: Projectionsofchangeinrealgrossdomesticproduct(GDP)andprojectionsforbothmeasuresofinflationarepercentchangesfromthefourthquarterof
thepreviousyeartothefourthquarteroftheyearindicated. PCEinflationandcorePCEinflationarethepercentageratesofchangein,respectively,thepriceindex
forpersonalconsumptionexpenditures(PCE)andthepriceindexforPCEexcludingfoodandenergy. Projectionsfortheunemploymentratearefortheaverage
civilianunemploymentrateinthefourthquarteroftheyearindicated. Eachparticipant’sprojectionsarebasedonhisorherassessmentofappropriatemonetary
policy. Longer-runprojectionsrepresenteachparticipant’sassessmentoftheratetowhicheachvariablewouldbeexpectedtoconvergeunderappropriatemonetary
policyandintheabsenceoffurthershockstotheeconomy. Theprojectionsforthefederalfundsratearethevalueofthemidpointoftheprojectedappropriate
targetrangeforthefederalfundsrateortheprojectedappropriatetargetlevelforthefederalfundsrateattheendofthespecifiedcalendaryearoroverthelonger
run. TheJuneprojectionsweremadeinconjunctionwiththemeetingoftheFederalOpenMarketCommitteeonJune15–16,2021. Oneparticipantdidnotsubmit
longer-runprojectionsforthechangeinrealGDP,theunemploymentrate,orthefederalfundsrateinconjunctionwiththeJune15–16,2021,meeting,andone
participantdidnotsubmitsuchprojectionsinconjunctionwiththeSeptember21–22,2021,meeting.
1. Foreachperiod,themedianisthemiddleprojectionwhentheprojectionsarearrangedfromlowesttohighest. Whenthenumberofprojectionsiseven,the
medianistheaverageofthetwomiddleprojections.
2. Thecentraltendencyexcludesthethreehighestandthreelowestprojectionsforeachvariableineachyear.
3. Therangeforavariableinagivenyearincludesallparticipants’projections,fromlowesttohighest,forthatvariableinthatyear.
4. Longer-runprojectionsforcorePCEinflationarenotcollected.
Page 2 of 17
For release at 2:00 p.m., EDT, September 22, 2021
Figure 1. Medians, central tendencies, and ranges of economic projections, 2021–24 and over the longer run
Percent
Change in real GDP
8
7
6
5
Actual 4
3
2
1
0
−1
Median of projections
−2
Central tendency of projections −3
Range of projections −4
2016 2017 2018 2019 2020 2021 2022 2023 2024 Longer
run
Percent
Unemployment rate
8
7
6
5
4
3
2
1
2016 2017 2018 2019 2020 2021 2022 2023 2024 Longer
run
Percent
PCE inflation
5
4
3
2
1
2016 2017 2018 2019 2020 2021 2022 2023 2024 Longer
run
Percent
Core PCE inflation
5
4
3
2
1
2016 2017 2018 2019 2020 2021 2022 2023 2024 Longer
run
Note: Definitionsofvariablesandotherexplanationsareinthenotestotable1. Thedatafortheactualvalues
ofthevariablesareannual.
Page 3 of 17
Forreleaseat2:00p.m.,EDT,September22,2021
Figure 2. FOMC participants’ assessments of appropriate monetary policy: Midpoint of target range
or target level for the federal funds rate
Percent
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
2021 2022 2023 2024 Longer run
Note: Each shaded circle indicates the value (rounded to the nearest 1/8 percentage point) of an individual
participant’sjudgmentofthemidpointoftheappropriatetargetrangeforthefederalfundsrateortheappropriate
targetlevelforthefederalfundsrateattheendofthespecifiedcalendaryearoroverthelongerrun. Oneparticipant
didnotsubmitlonger-runprojectionsforthefederalfundsrate.
Page 4 of 17
Forreleaseat2:00p.m.,EDT,September22,2021
Figure3.A.Distributionofparticipants’projectionsforthechangeinrealGDP,2021–24andoverthelongerrun
Number of participants
2021 September projections 1 1 6 8
June projections 1 1 2 4
10
8
6
4
2
1.4− 2.0− 2.6− 3.2− 3.8− 4.4− 5.0− 5.6− 6.2− 6.8− 7.4−
1.5 2.1 2.7 3.3 3.9 4.5 5.1 5.7 6.3 6.9 7.5
Percent range
Number of participants
2022 18
16
14
12
10
8
6
4
2
1.4− 2.0− 2.6− 3.2− 3.8− 4.4− 5.0− 5.6− 6.2− 6.8− 7.4−
1.5 2.1 2.7 3.3 3.9 4.5 5.1 5.7 6.3 6.9 7.5
Percent range
Number of participants
2023 18
16
14
12
10
8
6
4
2
1.4− 2.0− 2.6− 3.2− 3.8− 4.4− 5.0− 5.6− 6.2− 6.8− 7.4−
1.5 2.1 2.7 3.3 3.9 4.5 5.1 5.7 6.3 6.9 7.5
Percent range
Number of participants
2024 18
16
14
12
10
8
6
4
2
1.4− 2.0− 2.6− 3.2− 3.8− 4.4− 5.0− 5.6− 6.2− 6.8− 7.4−
1.5 2.1 2.7 3.3 3.9 4.5 5.1 5.7 6.3 6.9 7.5
Percent range
Number of participants
Longer run 18
16
14
12
10
8
6
4
2
1.4− 2.0− 2.6− 3.2− 3.8− 4.4− 5.0− 5.6− 6.2− 6.8− 7.4−
1.5 2.1 2.7 3.3 3.9 4.5 5.1 5.7 6.3 6.9 7.5
Percent range
Note: Definitionsofvariablesandotherexplanationsareinthenotestotable1.
Page 5 of 17
Forreleaseat2:00p.m.,EDT,September22,2021
Figure3.B.Distributionofparticipants’projectionsfortheunemploymentrate,2021–24andoverthelongerrun
Number of participants
2021 September projections 1 1 6 8
June projections 1 1 2 4
10
8
6
4
2
2.4− 3.0− 3.6− 4.2− 4.8−
2.5 3.1 3.7 4.3 4.9
Percent range
Number of participants
2022 18
16
14
12
10
8
6
4
2
2.4− 3.0− 3.6− 4.2− 4.8−
2.5 3.1 3.7 4.3 4.9
Percent range
Number of participants
2023 18
16
14
12
10
8
6
4
2
2.4− 3.0− 3.6− 4.2− 4.8−
2.5 3.1 3.7 4.3 4.9
Percent range
Number of participants
2024 18
16
14
12
10
8
6
4
2
2.4− 3.0− 3.6− 4.2− 4.8−
2.5 3.1 3.7 4.3 4.9
Percent range
Number of participants
Longer run 18
16
14
12
10
8
6
4
2
2.4− 3.0− 3.6− 4.2− 4.8−
2.5 3.1 3.7 4.3 4.9
Percent range
Note: Definitionsofvariablesandotherexplanationsareinthenotestotable1.
Page 6 of 17
Forreleaseat2:00p.m.,EDT,September22,2021
Figure3.C.Distributionofparticipants’projectionsforPCEinflation,2021–24andoverthelongerrun
Number of participants
2021
September projections
June projections 18
16
14
12
10
8
6
4
2
1.3− 1.5− 1.7− 1.9− 2.1− 2.3− 2.5− 2.7− 2.9− 3.1− 3.3− 3.5− 3.7− 3.9− 4.1− 4.3−
1.4 1.6 1.8 2.0 2.2 2.4 2.6 2.8 3.0 3.2 3.4 3.6 3.8 4.0 4.2 4.4
Percent range
Number of participants
2022
18
16
14
12
10
8
6
4
2
1.3− 1.5− 1.7− 1.9− 2.1− 2.3− 2.5− 2.7− 2.9− 3.1− 3.3− 3.5− 3.7− 3.9− 4.1− 4.3−
1.4 1.6 1.8 2.0 2.2 2.4 2.6 2.8 3.0 3.2 3.4 3.6 3.8 4.0 4.2 4.4
Percent range
Number of participants
2023
18
16
14
12
10
8
6
4
2
1.3− 1.5− 1.7− 1.9− 2.1− 2.3− 2.5− 2.7− 2.9− 3.1− 3.3− 3.5− 3.7− 3.9− 4.1− 4.3−
1.4 1.6 1.8 2.0 2.2 2.4 2.6 2.8 3.0 3.2 3.4 3.6 3.8 4.0 4.2 4.4
Percent range
Number of participants
2024
18
16
14
12
10
8
6
4
2
1.3− 1.5− 1.7− 1.9− 2.1− 2.3− 2.5− 2.7− 2.9− 3.1− 3.3− 3.5− 3.7− 3.9− 4.1− 4.3−
1.4 1.6 1.8 2.0 2.2 2.4 2.6 2.8 3.0 3.2 3.4 3.6 3.8 4.0 4.2 4.4
Percent range
Number of participants
Longer run
18
16
14
12
10
8
6
4
2
1.3− 1.5− 1.7− 1.9− 2.1− 2.3− 2.5− 2.7− 2.9− 3.1− 3.3− 3.5− 3.7− 3.9− 4.1− 4.3−
1.4 1.6 1.8 2.0 2.2 2.4 2.6 2.8 3.0 3.2 3.4 3.6 3.8 4.0 4.2 4.4
Percent range
Note: Definitionsofvariablesandotherexplanationsareinthenotestotable1.
Page 7 of 17
Forreleaseat2:00p.m.,EDT,September22,2021
Figure3.D.Distributionofparticipants’projectionsforcorePCEinflation,2021–24
Number of participants
2021
September projections
June projections
18
16
14
12
10
8
6
4
2
1.5− 1.7− 1.9− 2.1− 2.3− 2.5− 2.7− 2.9− 3.1− 3.3− 3.5− 3.7− 3.9− 4.1−
1.6 1.8 2.0 2.2 2.4 2.6 2.8 3.0 3.2 3.4 3.6 3.8 4.0 4.2
Percent range
Number of participants
2022
18
16
14
12
10
8
6
4
2
1.5− 1.7− 1.9− 2.1− 2.3− 2.5− 2.7− 2.9− 3.1− 3.3− 3.5− 3.7− 3.9− 4.1−
1.6 1.8 2.0 2.2 2.4 2.6 2.8 3.0 3.2 3.4 3.6 3.8 4.0 4.2
Percent range
Number of participants
2023
18
16
14
12
10
8
6
4
2
1.5− 1.7− 1.9− 2.1− 2.3− 2.5− 2.7− 2.9− 3.1− 3.3− 3.5− 3.7− 3.9− 4.1−
1.6 1.8 2.0 2.2 2.4 2.6 2.8 3.0 3.2 3.4 3.6 3.8 4.0 4.2
Percent range
Number of participants
2024
18
16
14
12
10
8
6
4
2
1.5− 1.7− 1.9− 2.1− 2.3− 2.5− 2.7− 2.9− 3.1− 3.3− 3.5− 3.7− 3.9− 4.1−
1.6 1.8 2.0 2.2 2.4 2.6 2.8 3.0 3.2 3.4 3.6 3.8 4.0 4.2
Percent range
Note: Definitionsofvariablesandotherexplanationsareinthenotestotable1.
Page 8 of 17
Forreleaseat2:00p.m.,EDT,September22,2021
Figure3.E.Distributionofparticipants’judgmentsofthemidpointoftheappropriatetargetrangeforthe
federalfundsrateortheappropriatetargetlevelforthefederalfundsrate,2021–24andoverthelongerrun
Number of participants
2021
September projections
June projections 18
16
14
12
10
8
6
4
2
0.13− 0.38− 0.63− 0.88− 1.13− 1.38− 1.63− 1.88− 2.13− 2.38− 2.63− 2.88−
0.37 0.62 0.87 1.12 1.37 1.62 1.87 2.12 2.37 2.62 2.87 3.12
Percent range
Number of participants
2022
18
16
14
12
10
8
6
4
2
0.13− 0.38− 0.63− 0.88− 1.13− 1.38− 1.63− 1.88− 2.13− 2.38− 2.63− 2.88−
0.37 0.62 0.87 1.12 1.37 1.62 1.87 2.12 2.37 2.62 2.87 3.12
Percent range
Number of participants
2023
18
16
14
12
10
8
6
4
2
0.13− 0.38− 0.63− 0.88− 1.13− 1.38− 1.63− 1.88− 2.13− 2.38− 2.63− 2.88−
0.37 0.62 0.87 1.12 1.37 1.62 1.87 2.12 2.37 2.62 2.87 3.12
Percent range
Number of participants
2024
18
16
14
12
10
8
6
4
2
0.13− 0.38− 0.63− 0.88− 1.13− 1.38− 1.63− 1.88− 2.13− 2.38− 2.63− 2.88−
0.37 0.62 0.87 1.12 1.37 1.62 1.87 2.12 2.37 2.62 2.87 3.12
Percent range
Number of participants
Longer run
18
16
14
12
10
8
6
4
2
0.13− 0.38− 0.63− 0.88− 1.13− 1.38− 1.63− 1.88− 2.13− 2.38− 2.63− 2.88−
0.37 0.62 0.87 1.12 1.37 1.62 1.87 2.12 2.37 2.62 2.87 3.12
Percent range
Note: Definitionsofvariablesandotherexplanationsareinthenotestotable1.
Page 9 of 17
Forreleaseat2:00p.m.,EDT,September22,2021
Figure 4.A. Uncertainty and risks in projections of GDP growth
Median projection and confidence interval based on historical forecast errors
Percent
Change in real GDP
Median of projections 8
70% confidence interval 7
6
5
4
3
2
Actual 1
0
−1
−2
−3
−4
2016 2017 2018 2019 2020 2021 2022 2023 2024
FOMC participants’ assessments of uncertainty and risks around their economic projections
Number of participants Number of participants
Uncertainty about GDP growth Risks to GDP growth
September projections September projections
June projections June projections
18 18
16 16
14 14
12 12
10 10
8 8
6 6
4 4
2 2
Lower Broadly Higher Weighted to Broadly Weighted to
similar downside balanced upside
Note: Theblueandredlinesinthetoppanelshowactualvaluesandmedianprojectedvalues,respectively,of
thepercentchangeinrealgrossdomesticproduct(GDP)fromthefourthquarterofthepreviousyeartothefourth
quarteroftheyearindicated. Theconfidenceintervalaroundthemedianprojectedvaluesisassumedtobesymmetric
and is based on root mean squared errors of various private and government forecasts made over the previous 20
years;moreinformationaboutthesedataisavailableintable2. Becausecurrentconditionsmaydifferfromthose
thatprevailed,onaverage,overtheprevious20years,thewidthandshapeoftheconfidenceintervalestimatedon
thebasisofthehistoricalforecasterrorsmaynotreflectFOMCparticipants’currentassessmentsoftheuncertainty
andrisksaroundtheirprojections;thesecurrentassessmentsaresummarizedinthelowerpanels. Generallyspeaking,
participantswhojudgetheuncertaintyabouttheirprojectionsas“broadlysimilar”totheaveragelevelsofthepast
20yearswouldviewthewidthoftheconfidenceintervalshowninthehistoricalfanchartaslargelyconsistentwith
their assessments of the uncertainty about their projections. Likewise, participants who judge the risks to their
projections as “broadly balanced” would view the confidence interval around their projections as approximately
symmetric. Fordefinitionsofuncertaintyandrisksineconomicprojections,seethebox“ForecastUncertainty.”
Page 10 of 17
Forreleaseat2:00p.m.,EDT,September22,2021
Figure 4.B. Uncertainty and risks in projections of the unemployment rate
Median projection and confidence interval based on historical forecast errors
Percent
Unemployment rate
Median of projections 8
70% confidence interval
7
6
5
4
Actual
3
2
1
2016 2017 2018 2019 2020 2021 2022 2023 2024
FOMC participants’ assessments of uncertainty and risks around their economic projections
Number of participants Number of participants
Uncertainty about the unemployment rate Risks to the unemployment rate
September projections September projections
June projections June projections
18 18
16 16
14 14
12 12
10 10
8 8
6 6
4 4
2 2
Lower Broadly Higher Weighted to Broadly Weighted to
similar downside balanced upside
Note: Theblueandredlinesinthetoppanelshowactualvaluesandmedianprojectedvalues,respectively,of
theaveragecivilianunemploymentrateinthefourthquarteroftheyearindicated. Theconfidenceintervalaround
themedianprojectedvaluesisassumedtobesymmetricandisbasedonrootmeansquarederrorsofvariousprivate
andgovernmentforecastsmadeovertheprevious20years;moreinformationaboutthesedataisavailableintable2.
Becausecurrentconditionsmaydifferfromthosethatprevailed,onaverage,overtheprevious20years,thewidth
andshapeoftheconfidenceintervalestimatedonthebasisofthehistoricalforecasterrorsmaynotreflectFOMC
participants’currentassessmentsoftheuncertaintyandrisksaroundtheirprojections;thesecurrentassessmentsare
summarizedinthelowerpanels. Generallyspeaking,participantswhojudgetheuncertaintyabouttheirprojections
as“broadlysimilar”totheaveragelevelsofthepast20yearswouldviewthewidthoftheconfidenceintervalshown
in the historical fan chart as largely consistent with their assessments of the uncertainty about their projections.
Likewise, participants who judge the risks to their projections as “broadly balanced” would view the confidence
intervalaroundtheirprojectionsasapproximatelysymmetric. Fordefinitionsofuncertaintyandrisksineconomic
projections,seethebox“ForecastUncertainty.”
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Forreleaseat2:00p.m.,EDT,September22,2021
Figure 4.C. Uncertainty and risks in projections of PCE inflation
Median projection and confidence interval based on historical forecast errors
Percent
PCE inflation
Median of projections
70% confidence interval
5
4
3
Actual 2
1
2016 2017 2018 2019 2020 2021 2022 2023 2024
FOMC participants’ assessments of uncertainty and risks around their economic projections
Number of participants Number of participants
Uncertainty about PCE inflation Risks to PCE inflation
September projections September projections
June projections June projections
18 18
16 16
14 14
12 12
10 10
8 8
6 6
4 4
2 2
Lower Broadly Higher Weighted to Broadly Weighted to
similar downside balanced upside
Number of participants Number of participants
Uncertainty about core PCE inflation Risks to core PCE inflation
September projections September projections
June projections June projections
18 18
16 16
14 14
12 12
10 10
8 8
6 6
4 4
2 2
Lower Broadly Higher Weighted to Broadly Weighted to
similar downside balanced upside
Note: The blue and red lines in the top panel show actual values and median projected values, respectively,
ofthepercentchangeinthepriceindexforpersonalconsumptionexpenditures(PCE)fromthefourthquarterof
thepreviousyeartothefourthquarteroftheyearindicated. Theconfidenceintervalaroundthemedianprojected
values is assumed to be symmetric and is based on root mean squared errors of various private and government
forecastsmadeovertheprevious20years;moreinformationaboutthesedataisavailableintable2. Becausecurrent
conditionsmaydifferfromthosethatprevailed,onaverage,overtheprevious20years,thewidthandshapeofthe
confidenceintervalestimatedonthebasisofthehistoricalforecasterrorsmaynotreflectFOMCparticipants’current
assessmentsoftheuncertaintyandrisksaroundtheirprojections;thesecurrentassessmentsaresummarizedinthe
lowerpanels. Generallyspeaking,participantswhojudgetheuncertaintyabouttheirprojectionsas“broadlysimilar”
totheaveragelevelsofthepast20yearswouldviewthewidthoftheconfidenceintervalshowninthehistoricalfan
chartaslargelyconsistentwiththeirassessmentsoftheuncertaintyabouttheirprojections. Likewise,participants
who judge the risks to their projections as “broadly balanced” would view the confidence interval around their
projectionsasapproximatelysymmetric. Fordefinitionsofuncertaintyandrisksineconomicprojections,seethebox
“ForecastUncertainty.”
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Forreleaseat2:00p.m.,EDT,September22,2021
Figure 4.D. Diffusion indexes of participants’ uncertainty assessments
Diffusion index
Change in real GDP
1.00
0.75
0.50
0.25
0.00
−0.25
−0.50
−0.75
−1.00
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Diffusion index
Unemployment rate
1.00
0.75
0.50
0.25
0.00
−0.25
−0.50
−0.75
−1.00
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Diffusion index
PCE inflation
1.00
0.75
0.50
0.25
0.00
−0.25
−0.50
−0.75
−1.00
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Diffusion index
Core PCE inflation
1.00
0.75
0.50
0.25
0.00
−0.25
−0.50
−0.75
−1.00
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Note: For each SEP, participants provided responses to the question “Please indicate your judgment of the
uncertainty attached to your projections relative to the levels of uncertainty over the past 20 years.” Each point
in the diffusion indexes represents the number of participants who responded “Higher” minus the number who
responded“Lower,”dividedbythetotalnumberofparticipants. FigureexcludesMarch2020whennoprojections
weresubmitted.
Page 13 of 17
Forreleaseat2:00p.m.,EDT,September22,2021
Figure 4.E. Diffusion indexes of participants’ risk weightings
Diffusion index
Change in real GDP
1.00
0.75
0.50
0.25
0.00
−0.25
−0.50
−0.75
−1.00
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Diffusion index
Unemployment rate
1.00
0.75
0.50
0.25
0.00
−0.25
−0.50
−0.75
−1.00
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Diffusion index
PCE inflation
1.00
0.75
0.50
0.25
0.00
−0.25
−0.50
−0.75
−1.00
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Diffusion index
Core PCE inflation
1.00
0.75
0.50
0.25
0.00
−0.25
−0.50
−0.75
−1.00
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Note: ForeachSEP,participantsprovidedresponsestothequestion“Pleaseindicateyourjudgmentoftherisk
weightingaroundyourprojections.” Eachpointinthediffusionindexesrepresentsthenumberofparticipantswho
responded“WeightedtotheUpside”minusthenumberwhoresponded“WeightedtotheDownside,”dividedbythe
totalnumberofparticipants. FigureexcludesMarch2020whennoprojectionsweresubmitted.
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Forreleaseat2:00p.m.,EDT,September22,2021
Figure 5. Uncertainty and risks in projections of the federal funds rate
Percent
Federal funds rate
Midpoint of target range
Median of projections
70% confidence interval*
4
3
2
Actual
1
0
2016 2017 2018 2019 2020 2021 2022 2023 2024
Note: The blue and red lines are based on actual values and median projected values, respectively, of the
Committee’stargetforthefederalfundsrateattheendoftheyearindicated. Theactualvaluesarethemidpointof
thetargetrange;themedianprojectedvaluesarebasedoneitherthemidpointofthetargetrangeorthetargetlevel.
Theconfidenceintervalaroundthemedianprojectedvaluesisbasedonrootmeansquarederrorsofvariousprivate
andgovernmentforecastsmadeovertheprevious20years. Theconfidenceintervalisnotstrictlyconsistentwiththe
projectionsforthefederalfundsrate,primarilybecausetheseprojectionsarenotforecastsofthelikeliestoutcomes
for the federal funds rate, but rather projections of participants’ individual assessments of appropriate monetary
policy. Still,historicalforecasterrorsprovideabroadsenseoftheuncertaintyaroundthefuturepathofthefederal
funds rate generated by the uncertainty about the macroeconomic variables as well as additional adjustments to
monetarypolicythatmaybeappropriatetoonsettheeffectsofshockstotheeconomy.
Theconfidenceintervalisassumedtobesymmetricexceptwhenitistruncatedatzero-thebottomofthelowest
targetrangeforthefederalfundsratethathasbeenadoptedinthepastbytheCommittee. Thistruncationwould
notbeintendedtoindicatethelikelihoodoftheuseofnegativeinterestratestoprovideadditionalmonetarypolicy
accommodationifdoingsowasjudgedappropriate. Insuchsituations,theCommitteecouldalsoemployothertools,
includingforwardguidanceandlarge-scaleassetpurchases,toprovideadditionalaccommodation. Becausecurrent
conditionsmaydifferfromthosethatprevailed,onaverage,overtheprevious20years,thewidthandshapeofthe
confidenceintervalestimatedonthebasisofthehistoricalforecasterrorsmaynotreflectFOMCparticipants’current
assessmentsoftheuncertaintyandrisksaroundtheirprojections.
*Theconfidenceintervalisderivedfromforecastsoftheaveragelevelofshort-terminterestratesinthefourth
quarteroftheyearindicated;moreinformationaboutthesedataisavailableintable2. Theshadedareaencompasses
lessthana70percentconfidenceintervaliftheconfidenceintervalhasbeentruncatedatzero.
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Forreleaseat2:00p.m.,EDT,September22,2021
Table 2. Average Historical Projection Error Ranges
(Percentage points)
Variable 2021 2022 2023 2024
Change in real GDP1 .............. ±1.2 ±1.9 ±2.1 ±2.2
Unemployment rate1 .............. ±0.5 ±1.3 ±1.8 ±2.1
Total consumer prices2 ............ ±0.8 ±1.0 ±1.1 ±1.0
Short-term interest rates3 ......... ±0.5 ±1.8 ±2.4 ±2.7
Note: Error ranges shown are measured as plus or minus the root mean
squarederrorofprojectionsfor2001through2020thatwerereleasedinthefall
byvariousprivateandgovernmentforecasters. Asdescribedinthebox“Forecast
Uncertainty,”undercertainassumptions,thereisabouta70percentprobability
thatactualoutcomesforrealGDP,unemployment,consumerprices,andthefederal
fundsratewillbeinrangesimpliedbytheaveragesizeofprojectionerrorsmade
inthepast. Formoreinformation,seeDavidReifschneiderandPeterTulip(2017),
“GaugingtheUncertaintyoftheEconomicOutlookUsingHistoricalForecasting
Errors: The Federal Reserve’s Approach,” Finance and Economics Discussion
Series2017-020(Washington: BoardofGovernorsoftheFederalReserveSystem,
February),https://dx.doi.org/10.17016/FEDS.2017.020.
1. Definitionsofvariablesareinthegeneralnotetotable1.
2. Measure is the overall consumer price index, the price measure that has
beenmostwidelyusedingovernmentandprivateeconomicforecasts. Projections
arepercentchangesonafourthquartertofourthquarterbasis.
3. ForFederalReservestaffforecasts,measureisthefederalfundsrate. For
otherforecasts,measureistherateon3-monthTreasurybills. Projectionerrors
arecalculatedusingaveragelevels,inpercent,inthefourthquarter.
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For release at 2:00 p.m., EDT, September 22, 2021
Forecast Uncertainty
The economic projections provided by the members of rent assessments of the uncertainty surrounding their projec-
the Board of Governors and the presidents of the Federal tions are summarized in the bottom-left panels of those fig-
Reserve Banks inform discussions of monetary policy among ures. Participants also provide judgments as to whether the
policymakers and can aid public understanding of the basis risks to their projections are weighted to the upside, are
for policy actions. Considerable uncertainty attends these weighted to the downside, or are broadly balanced. That is,
projections, however. The economic and statistical models while the symmetric historical fan charts shown in the top
and relationships used to help produce economic forecasts panels of figures 4.A through 4.C imply that the risks to par-
are necessarily imperfect descriptions of the real world, and ticipants’ projections are balanced, participants may judge that
the future path of the economy can be affected by myriad there is a greater risk that a given variable will be above rather
unforeseen developments and events. Thus, in setting the than below their projections. These judgments are summa-
stance of monetary policy, participants consider not only rized in the lower-right panels of figures 4.A through 4.C.
what appears to be the most likely economic outcome as em- As with real activity and inflation, the outlook for the
bodied in their projections, but also the range of alternative future path of the federal funds rate is subject to considerable
possibilities, the likelihood of their occurring, and the poten- uncertainty. This uncertainty arises primarily because each
tial costs to the economy should they occur. participant’s assessment of the appropriate stance of mone-
Table 2 summarizes the average historical accuracy of a tary policy depends importantly on the evolution of real ac-
range of forecasts, including those reported in past Monetary tivity and inflation over time. If economic conditions evolve
Policy Reports and those prepared by the Federal Reserve in an unexpected manner, then assessments of the appropri-
Board’s staff in advance of meetings of the Federal Open ate setting of the federal funds rate would change from that
Market Committee (FOMC). The projection error ranges point forward. The final line in table 2 shows the error ranges
shown in the table illustrate the considerable uncertainty as- for forecasts of short-term interest rates. They suggest that
sociated with economic forecasts. For example, suppose a the historical confidence intervals associated with projections
participant projects that real gross domestic product (GDP) of the federal funds rate are quite wide. It should be noted,
and total consumer prices will rise steadily at annual rates of, however, that these confidence intervals are not strictly con-
respectively, 3 percent and 2 percent. If the uncertainty at- sistent with the projections for the federal funds rate, as these
tending those projections is similar to that experienced in the projections are not forecasts of the most likely quarterly out-
past and the risks around the projections are broadly bal- comes but rather are projections of participants’ individual as-
anced, the numbers reported in table 2 would imply a prob- sessments of appropriate monetary policy and are on an end-
ability of about 70 percent that actual GDP would expand of-year basis. However, the forecast errors should provide a
within a range of 1.8 to 4.2 percent in the current year, 1.1 to sense of the uncertainty around the future path of the federal
4.9 percent in the second year, 0.9 to 5.1 percent in the third funds rate generated by the uncertainty about the macroeco-
year, and 0.8 to 5.2 percent in the fourth year. The corre- nomic variables as well as additional adjustments to monetary
sponding 70 percent confidence intervals for overall infla- policy that would be appropriate to offset the effects of
tion would be 1.2 to 2.8 percent in the current year, 1.0 to shocks to the economy.
3.0 percent in the second year, 0.9 to 3.1 percent in the third If at some point in the future the confidence interval
year, and 1.0 to 3.0 percent in the fourth year. Figures 4.A around the federal funds rate were to extend below zero, it
through 4.C illustrate these confidence bounds in “fan would be truncated at zero for purposes of the fan chart
charts” that are symmetric and centered on the medians of shown in figure 5; zero is the bottom of the lowest target
FOMC participants’ projections for GDP growth, the unem- range for the federal funds rate that has been adopted by the
ployment rate, and inflation. However, in some instances, Committee in the past. This approach to the construction of
the risks around the projections may not be symmetric. In the federal funds rate fan chart would be merely a convention;
particular, the unemployment rate cannot be negative; fur- it would not have any implications for possible future policy
thermore, the risks around a particular projection might be decisions regarding the use of negative interest rates to pro-
tilted to either the upside or the downside, in which case the vide additional monetary policy accommodation if doing so
corresponding fan chart would be asymmetrically positioned were appropriate. In such situations, the Committee could
around the median projection. also employ other tools, including forward guidance and asset
Because current conditions may differ from those that purchases, to provide additional accommodation.
prevailed, on average, over history, participants provide While figures 4.A through 4.C provide information on
judgments as to whether the uncertainty attached to their the uncertainty around the economic projections, figure 1
projections of each economic variable is greater than, smaller provides information on the range of views across FOMC
than, or broadly similar to typical levels of forecast uncer- participants. A comparison of figure 1 with figures 4.A
tainty seen in the past 20 years, as presented in table 2 and through 4.C shows that the dispersion of the projections
reflected in the widths of the confidence intervals shown in across participants is much smaller than the average forecast
the top panels of figures 4.A through 4.C. Participants’ cur- errors over the past 20 years.
Page 17 of 17
Cite this document
APA
Federal Reserve (2021, September 21). Summary of Economic Projections. Sep, Federal Reserve. https://whenthefedspeaks.com/doc/sep_20210922
BibTeX
@misc{wtfs_sep_20210922,
author = {Federal Reserve},
title = {Summary of Economic Projections},
year = {2021},
month = {Sep},
howpublished = {Sep, Federal Reserve},
url = {https://whenthefedspeaks.com/doc/sep_20210922},
note = {Retrieved via When the Fed Speaks corpus}
}