Summary of Economic Projections

For release at 2:00 p.m., EDT, September 21, 2022 Summary of Economic Projections In conjunction with the Federal Open Market Committee (FOMC) meeting held on September 20–21, 2022, 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 2022 to 2025 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 21, 2022 Table 1. Economic projections of Federal Reserve Board members and Federal Reserve Bank presidents, under their individual assumptions of projected appropriate monetary policy, September 2022 Percent Median1 CentralTendency2 Range3 Variable 2022 2023 2024 2025 Longer 2022 2023 2024 2025 Longer 2022 2023 2024 2025 Longer run run run ChangeinrealGDP 0.2 1.2 1.7 1.8 1.8 0.1–0.3 0.5–1.5 1.4–2.0 1.6–2.0 1.7–2.0 0.0–0.5 -0.3–1.9 1.0–2.6 1.4–2.4 1.6–2.2 Juneprojection 1.7 1.7 1.9 1.8 1.5–1.9 1.3–2.0 1.5–2.0 1.8–2.0 1.0–2.0 0.8–2.5 1.0–2.2 1.6–2.2 Unemploymentrate 3.8 4.4 4.4 4.3 4.0 3.8–3.9 4.1–4.5 4.0–4.6 4.0–4.5 3.8–4.3 3.7–4.0 3.7–5.0 3.7–4.7 3.7–4.6 3.5–4.5 Juneprojection 3.7 3.9 4.1 4.0 3.6–3.8 3.8–4.1 3.9–4.1 3.5–4.2 3.2–4.0 3.2–4.5 3.2–4.3 3.5–4.3 PCEinflation 5.4 2.8 2.3 2.0 2.0 5.3–5.7 2.6–3.5 2.1–2.6 2.0–2.2 2.0 5.0–6.2 2.4–4.1 2.0–3.0 2.0–2.5 2.0 Juneprojection 5.2 2.6 2.2 2.0 5.0–5.3 2.4–3.0 2.0–2.5 2.0 4.8–6.2 2.3–4.0 2.0–3.0 2.0 CorePCEinflation4 4.5 3.1 2.3 2.1 4.4–4.6 3.0–3.4 2.2–2.5 2.0–2.2 4.3–4.8 2.8–3.5 2.0–2.8 2.0–2.5 Juneprojection 4.3 2.7 2.3 4.2–4.5 2.5–3.2 2.1–2.5 4.1–5.0 2.5–3.5 2.0–2.8 Memo: Projected appropriatepolicypath Federalfundsrate 4.4 4.6 3.9 2.9 2.5 4.1–4.4 4.4–4.9 3.4–4.4 2.4–3.4 2.3–2.5 3.9–4.6 3.9–4.9 2.6–4.6 2.4–4.6 2.3–3.0 Juneprojection 3.4 3.8 3.4 2.5 3.1–3.6 3.6–4.1 2.9–3.6 2.3–2.5 3.1–3.9 2.9–4.4 2.1–4.1 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. TheJuneprojectionsweremadeinconjunctionwiththemeetingoftheFederalOpenMarketCommitteeonJune14–15,2022. Oneparticipantdidnotsubmit longer-runprojectionsforthechangeinrealGDP,theunemploymentrate,orthefederalfundsrateinconjunctionwiththeJune14–15,2022,meeting,andone participantdidnotsubmitsuchprojectionsinconjunctionwiththeSeptember20–21,2022,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 21, 2022 Figure 1. Medians, central tendencies, and ranges of economic projections, 2022–25 and over the longer run Percent Change in real GDP 6 5 Actual 4 3 2 1 0 Median of projections −1 Central tendency of projections −2 Range of projections −3 2017 2018 2019 2020 2021 2022 2023 2024 2025 Longer run Percent Unemployment rate 7 6 5 4 3 2 1 2017 2018 2019 2020 2021 2022 2023 2024 2025 Longer run Percent PCE inflation 7 6 5 4 3 2 1 2017 2018 2019 2020 2021 2022 2023 2024 2025 Longer run Percent Core PCE inflation 7 6 5 4 3 2 1 2017 2018 2019 2020 2021 2022 2023 2024 2025 Longer run Note: Definitionsofvariablesandotherexplanationsareinthenotestotable1. Thedatafortheactualvalues ofthevariablesareannual. Page 3 of 17 Forreleaseat2:00p.m.,EDT,September21,2022 Figure 2. FOMC participants’ assessments of appropriate monetary policy: Midpoint of target range or target level for the federal funds rate Percent 6.0 5.5 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 2022 2023 2024 2025 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,September21,2022 Figure3.A.Distributionofparticipants’projectionsforthechangeinrealGDP,2022–25andoverthelongerrun Number of participants 2022 20 September projections 18 June projections 16 14 12 10 8 6 4 2 −0.6− −0.4− −0.2− 0.0− 0.2− 0.4− 0.6− 0.8− 1.0− 1.2− 1.4− 1.6− 1.8− 2.0− 2.2− 2.4− 2.6− −0.5 −0.3 −0.1 0.1 0.3 0.5 0.7 0.9 1.1 1.3 1.5 1.7 1.9 2.1 2.3 2.5 2.7 Percent range Number of participants 2023 20 18 16 14 12 10 8 6 4 2 −0.6− −0.4− −0.2− 0.0− 0.2− 0.4− 0.6− 0.8− 1.0− 1.2− 1.4− 1.6− 1.8− 2.0− 2.2− 2.4− 2.6− −0.5 −0.3 −0.1 0.1 0.3 0.5 0.7 0.9 1.1 1.3 1.5 1.7 1.9 2.1 2.3 2.5 2.7 Percent range Number of participants 2024 20 18 16 14 12 10 8 6 4 2 −0.6− −0.4− −0.2− 0.0− 0.2− 0.4− 0.6− 0.8− 1.0− 1.2− 1.4− 1.6− 1.8− 2.0− 2.2− 2.4− 2.6− −0.5 −0.3 −0.1 0.1 0.3 0.5 0.7 0.9 1.1 1.3 1.5 1.7 1.9 2.1 2.3 2.5 2.7 Percent range Number of participants 2025 20 18 16 14 12 10 8 6 4 2 −0.6− −0.4− −0.2− 0.0− 0.2− 0.4− 0.6− 0.8− 1.0− 1.2− 1.4− 1.6− 1.8− 2.0− 2.2− 2.4− 2.6− −0.5 −0.3 −0.1 0.1 0.3 0.5 0.7 0.9 1.1 1.3 1.5 1.7 1.9 2.1 2.3 2.5 2.7 Percent range Number of participants Longer run 20 18 16 14 12 10 8 6 4 2 −0.6− −0.4− −0.2− 0.0− 0.2− 0.4− 0.6− 0.8− 1.0− 1.2− 1.4− 1.6− 1.8− 2.0− 2.2− 2.4− 2.6− −0.5 −0.3 −0.1 0.1 0.3 0.5 0.7 0.9 1.1 1.3 1.5 1.7 1.9 2.1 2.3 2.5 2.7 Percent range Note: Definitionsofvariablesandotherexplanationsareinthenotestotable1. Page 5 of 17 Forreleaseat2:00p.m.,EDT,September21,2022 Figure3.B.Distributionofparticipants’projectionsfortheunemploymentrate,2022–25andoverthelongerrun Number of participants 2022 20 September projections 18 June projections 16 14 12 10 8 6 4 2 3.0− 3.2− 3.4− 3.6− 3.8− 4.0− 4.2− 4.4− 4.6− 4.8− 5.0− 3.1 3.3 3.5 3.7 3.9 4.1 4.3 4.5 4.7 4.9 5.1 Percent range Number of participants 2023 20 18 16 14 12 10 8 6 4 2 3.0− 3.2− 3.4− 3.6− 3.8− 4.0− 4.2− 4.4− 4.6− 4.8− 5.0− 3.1 3.3 3.5 3.7 3.9 4.1 4.3 4.5 4.7 4.9 5.1 Percent range Number of participants 2024 20 18 16 14 12 10 8 6 4 2 3.0− 3.2− 3.4− 3.6− 3.8− 4.0− 4.2− 4.4− 4.6− 4.8− 5.0− 3.1 3.3 3.5 3.7 3.9 4.1 4.3 4.5 4.7 4.9 5.1 Percent range Number of participants 2025 20 18 16 14 12 10 8 6 4 2 3.0− 3.2− 3.4− 3.6− 3.8− 4.0− 4.2− 4.4− 4.6− 4.8− 5.0− 3.1 3.3 3.5 3.7 3.9 4.1 4.3 4.5 4.7 4.9 5.1 Percent range Number of participants Longer run 20 18 16 14 12 10 8 6 4 2 3.0− 3.2− 3.4− 3.6− 3.8− 4.0− 4.2− 4.4− 4.6− 4.8− 5.0− 3.1 3.3 3.5 3.7 3.9 4.1 4.3 4.5 4.7 4.9 5.1 Percent range Note: Definitionsofvariablesandotherexplanationsareinthenotestotable1. Page 6 of 17 Forreleaseat2:00p.m.,EDT,September21,2022 Figure3.C.Distributionofparticipants’projectionsforPCEinflation,2022–25andoverthelongerrun Number of participants 2022 September projections 20 June projections 18 16 14 12 10 8 6 4 2 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− 4.5− 4.7− 4.9− 5.1− 5.3− 5.5− 5.7− 5.9− 6.1− 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 4.6 4.8 5.0 5.2 5.4 5.6 5.8 6.0 6.2 Percent range Number of participants 2023 20 18 16 14 12 10 8 6 4 2 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− 4.5− 4.7− 4.9− 5.1− 5.3− 5.5− 5.7− 5.9− 6.1− 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 4.6 4.8 5.0 5.2 5.4 5.6 5.8 6.0 6.2 Percent range Number of participants 2024 20 18 16 14 12 10 8 6 4 2 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− 4.5− 4.7− 4.9− 5.1− 5.3− 5.5− 5.7− 5.9− 6.1− 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 4.6 4.8 5.0 5.2 5.4 5.6 5.8 6.0 6.2 Percent range Number of participants 2025 20 18 16 14 12 10 8 6 4 2 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− 4.5− 4.7− 4.9− 5.1− 5.3− 5.5− 5.7− 5.9− 6.1− 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 4.6 4.8 5.0 5.2 5.4 5.6 5.8 6.0 6.2 Percent range Number of participants Longer run 20 18 16 14 12 10 8 6 4 2 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− 4.5− 4.7− 4.9− 5.1− 5.3− 5.5− 5.7− 5.9− 6.1− 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 4.6 4.8 5.0 5.2 5.4 5.6 5.8 6.0 6.2 Percent range Note: Definitionsofvariablesandotherexplanationsareinthenotestotable1. Page 7 of 17 Forreleaseat2:00p.m.,EDT,September21,2022 Figure3.D.Distributionofparticipants’projectionsforcorePCEinflation,2022–25 Number of participants 2022 September projections 20 June projections 18 16 14 12 10 8 6 4 2 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− 4.5− 4.7− 4.9− 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 4.6 4.8 5.0 Percent range Number of participants 2023 20 18 16 14 12 10 8 6 4 2 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− 4.5− 4.7− 4.9− 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 4.6 4.8 5.0 Percent range Number of participants 2024 20 18 16 14 12 10 8 6 4 2 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− 4.5− 4.7− 4.9− 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 4.6 4.8 5.0 Percent range Number of participants 2025 20 18 16 14 12 10 8 6 4 2 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− 4.5− 4.7− 4.9− 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 4.6 4.8 5.0 Percent range Note: Definitionsofvariablesandotherexplanationsareinthenotestotable1. Page 8 of 17 Forreleaseat2:00p.m.,EDT,September21,2022 Figure3.E.Distributionofparticipants’judgmentsofthemidpointoftheappropriatetargetrangeforthe federalfundsrateortheappropriatetargetlevelforthefederalfundsrate,2022–25andoverthelongerrun Number of participants 2022 September projections 20 June projections 18 16 14 12 10 8 6 4 2 1.88− 2.13− 2.38− 2.63− 2.88− 3.13− 3.38− 3.63− 3.88− 4.13− 4.38− 4.63− 4.88− 2.12 2.37 2.62 2.87 3.12 3.37 3.62 3.87 4.12 4.37 4.62 4.87 5.12 Percent range Number of participants 2023 20 18 16 14 12 10 8 6 4 2 1.88− 2.13− 2.38− 2.63− 2.88− 3.13− 3.38− 3.63− 3.88− 4.13− 4.38− 4.63− 4.88− 2.12 2.37 2.62 2.87 3.12 3.37 3.62 3.87 4.12 4.37 4.62 4.87 5.12 Percent range Number of participants 2024 20 18 16 14 12 10 8 6 4 2 1.88− 2.13− 2.38− 2.63− 2.88− 3.13− 3.38− 3.63− 3.88− 4.13− 4.38− 4.63− 4.88− 2.12 2.37 2.62 2.87 3.12 3.37 3.62 3.87 4.12 4.37 4.62 4.87 5.12 Percent range Number of participants 2025 20 18 16 14 12 10 8 6 4 2 1.88− 2.13− 2.38− 2.63− 2.88− 3.13− 3.38− 3.63− 3.88− 4.13− 4.38− 4.63− 4.88− 2.12 2.37 2.62 2.87 3.12 3.37 3.62 3.87 4.12 4.37 4.62 4.87 5.12 Percent range Number of participants Longer run 20 18 16 14 12 10 8 6 4 2 1.88− 2.13− 2.38− 2.63− 2.88− 3.13− 3.38− 3.63− 3.88− 4.13− 4.38− 4.63− 4.88− 2.12 2.37 2.62 2.87 3.12 3.37 3.62 3.87 4.12 4.37 4.62 4.87 5.12 Percent range Note: Definitionsofvariablesandotherexplanationsareinthenotestotable1. Page 9 of 17 Forreleaseat2:00p.m.,EDT,September21,2022 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 6 Median of projections 70% confidence interval 5 4 3 2 Actual 1 0 −1 −2 −3 2017 2018 2019 2020 2021 2022 2023 2024 2025 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 20 20 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,September21,2022 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 7 70% confidence interval 6 Actual 5 4 3 2 1 2017 2018 2019 2020 2021 2022 2023 2024 2025 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 20 20 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.” Page 11 of 17 Forreleaseat2:00p.m.,EDT,September21,2022 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 7 70% confidence interval 6 5 4 3 Actual 2 1 2017 2018 2019 2020 2021 2022 2023 2024 2025 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 20 20 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 20 20 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.” Page 12 of 17 Forreleaseat2:00p.m.,EDT,September21,2022 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 2022 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 2022 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 2022 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 2022 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,September21,2022 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 2022 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 2022 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 2022 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 2022 Note: ForeachSEP,participantsprovidedresponsestothequestion“Pleaseindicateyourjudgmentoftherisk weightingaroundyourprojections.” Eachpointinthediffusionindexesrepresentsthenumberofparticipantswho responded“WeightedtotheUpside”minusthenumberwhoresponded“WeightedtotheDownside,”dividedbythe totalnumberofparticipants. FigureexcludesMarch2020whennoprojectionsweresubmitted. Page 14 of 17 Forreleaseat2:00p.m.,EDT,September21,2022 Figure 5. Uncertainty and risks in projections of the federal funds rate Percent Federal funds rate Midpoint of target range 7 Median of projections 70% confidence interval* 6 5 4 3 Actual 2 1 0 2017 2018 2019 2020 2021 2022 2023 2024 2025 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 monetarypolicythatmaybeappropriatetooffsettheeffectsofshockstotheeconomy. 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. Page 15 of 17 Forreleaseat2:00p.m.,EDT,September21,2022 Table 2. Average Historical Projection Error Ranges (Percentage points) Variable 2022 2023 2024 2025 Change in real GDP1 .............. ±1.2 ±1.8 ±2.2 ±2.4 Unemployment rate1 .............. ±0.5 ±1.3 ±1.8 ±2.1 Total consumer prices2 ............ ±0.9 ±1.5 ±1.3 ±1.1 Short-term interest rates3 ......... ±0.5 ±1.5 ±2.4 ±2.8 Note: Error ranges shown are measured as plus or minus the root mean squarederrorofprojectionsfor2002through2021thatwerereleasedinthefall 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. Page 16 of 17 For release at 2:00 p.m., EDT, September 21, 2022 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, 1.2 to sense of the uncertainty around the future path of the federal 4.8 percent in the second year, 0.8 to 5.2 percent in the third funds rate generated by the uncertainty about the macroeco- year, and 0.6 to 5.4 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 1.1 to 2.9 percent in the current year, 0.5 to shocks to the economy. 3.5 percent in the second year, 0.7 to 3.3 percent in the third If at some point in the future the confidence interval year, and 0.9 to 3.1 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

Federal Reserve (2022, September 20). Summary of Economic Projections. Sep, Federal Reserve. https://whenthefedspeaks.com/doc/sep_20220921

@misc{wtfs_sep_20220921,
  author = {Federal Reserve},
  title = {Summary of Economic Projections},
  year = {2022},
  month = {Sep},
  howpublished = {Sep, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/sep_20220921},
  note = {Retrieved via When the Fed Speaks corpus}
}