sep · March 18, 2025
Summary of Economic Projections
For release at 2:00 p.m., EDT, March 19, 2025
Summary of Economic Projections
In conjunction with the Federal Open Market Committee (FOMC) meeting held on
March 18–19, 2025, 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 2025 to 2027 and over the longer run. Each participant’s
projections were based on information available at the time of the meeting, 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.
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For release at 2:00 p.m., EDT, March 19, 2025
Table 1. Economic projections of Federal Reserve Board members and Federal Reserve Bank presidents,
under their individual assumptions of projected appropriate monetary policy, March 2025
Percent
Median1 CentralTendency2 Range3
Variable
2025 2026 2027 Longer 2025 2026 2027 Longer 2025 2026 2027 Longer
run run run
ChangeinrealGDP 1.7 1.8 1.8 1.8 1.5–1.9 1.6–1.9 1.6–2.0 1.7–2.0 1.0–2.4 0.6–2.5 0.6–2.5 1.5–2.5
Decemberprojection 2.1 2.0 1.9 1.8 1.8–2.2 1.9–2.1 1.8–2.0 1.7–2.0 1.6–2.5 1.4–2.5 1.5–2.5 1.7–2.5
Unemploymentrate 4.4 4.3 4.3 4.2 4.3–4.4 4.2–4.5 4.1–4.4 3.9–4.3 4.1–4.6 4.1–4.7 3.9–4.7 3.5–4.5
Decemberprojection 4.3 4.3 4.3 4.2 4.2–4.5 4.1–4.4 4.0–4.4 3.9–4.3 4.2–4.5 3.9–4.6 3.8–4.5 3.5–4.5
PCEinflation 2.7 2.2 2.0 2.0 2.6–2.9 2.1–2.3 2.0–2.1 2.0 2.5–3.4 2.0–3.1 1.9–2.8 2.0
Decemberprojection 2.5 2.1 2.0 2.0 2.3–2.6 2.0–2.2 2.0 2.0 2.1–2.9 2.0–2.6 2.0–2.4 2.0
CorePCEinflation4 2.8 2.2 2.0 2.7–3.0 2.1–2.4 2.0–2.1 2.5–3.5 2.1–3.2 2.0–2.9
Decemberprojection 2.5 2.2 2.0 2.5–2.7 2.0–2.3 2.0 2.1–3.2 2.0–2.7 2.0–2.6
Memo: Projected
appropriatepolicypath
Federalfundsrate 3.9 3.4 3.1 3.0 3.9–4.4 3.1–3.9 2.9–3.6 2.6–3.6 3.6–4.4 2.9–4.1 2.6–3.9 2.5–3.9
Decemberprojection 3.9 3.4 3.1 3.0 3.6–4.1 3.1–3.6 2.9–3.6 2.8–3.6 3.1–4.4 2.4–3.9 2.4–3.9 2.4–3.9
Note: Projectionsofchangeinrealgrossdomesticproduct(GDP)andprojectionsforbothmeasuresofinflationarepercentchangesfromthefourth
quarter of the previous year to the fourth quarter of the year indicated. PCE inflation and core PCE inflation are the percentage rates of change in,
respectively,thepriceindexforpersonalconsumptionexpenditures(PCE)andthepriceindexforPCEexcludingfoodandenergy. Projectionsforthe
unemploymentratearefortheaveragecivilianunemploymentrateinthefourthquarteroftheyearindicated. Eachparticipant’sprojectionsarebasedon
hisorherassessmentofappropriatemonetarypolicy. Longer-runprojectionsrepresenteachparticipant’sassessmentoftheratetowhicheachvariablewould
beexpectedtoconvergeunderappropriatemonetarypolicyandintheabsenceoffurthershockstotheeconomy. Theprojectionsforthefederalfundsrate
arethevalueofthemidpointoftheprojectedappropriatetargetrangeforthefederalfundsrateortheprojectedappropriatetargetlevelforthefederal
fundsrateattheendofthespecifiedcalendaryearoroverthelongerrun. TheDecemberprojectionsweremadeinconjunctionwiththemeetingofthe
FederalOpenMarketCommitteeonDecember17–18,2024.
1. Foreachperiod,themedianisthemiddleprojectionwhentheprojectionsarearrangedfromlowesttohighest. Whenthenumberofprojectionsis
even,themedianistheaverageofthetwomiddleprojections.
2. Thecentraltendencyexcludesthethreehighestandthreelowestprojectionsforeachvariableineachyear.
3. Therangeforavariableinagivenyearincludesallparticipants’projections,fromlowesttohighest,forthatvariableinthatyear.
4. Longer-runprojectionsforcorePCEinflationarenotcollected.
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For release at 2:00 p.m., EDT, March 19, 2025
Figure 1. Medians, central tendencies, and ranges of economic projections, 2025–27 and over the longer run
Percent
Change in real GDP
6
5
Actual
4
3
2
1
0
−1
Median of projections
−2
Central tendency of projections
Range of projections −3
2020 2021 2022 2023 2024 2025 2026 2027 Longer run
Percent
Unemployment rate
7
6
5
4
3
2
1
2020 2021 2022 2023 2024 2025 2026 2027 Longer run
Percent
PCE inflation
7
6
5
4
3
2
1
2020 2021 2022 2023 2024 2025 2026 2027 Longer run
Percent
Core PCE inflation
7
6
5
4
3
2
1
2020 2021 2022 2023 2024 2025 2026 2027 Longer run
Note: Definitionsofvariablesandotherexplanationsareinthenotestotable1. Thedatafortheactualvalues
ofthevariablesareannual.
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Forreleaseat2:00p.m.,EDT,March19,2025
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
2025 2026 2027 Longer run
Note: Each shaded circle indicates the value (rounded to the nearest 1/8 percentage point) of an individual
participant’sjudgmentofthemidpointoftheappropriatetargetrangeforthefederalfundsrateortheappropriate
targetlevelforthefederalfundsrateattheendofthespecifiedcalendaryearoroverthelongerrun.
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Forreleaseat2:00p.m.,EDT,March19,2025
Figure3.A.Distributionofparticipants’projectionsforthechangeinrealGDP,2025–27andoverthelongerrun
Number of participants
2025
20
March projections 18
December projections 16
14
12
10
8
6
4
2
0.4− 0.6− 0.8− 1.0− 1.2− 1.4− 1.6− 1.8− 2.0− 2.2− 2.4−
0.5 0.7 0.9 1.1 1.3 1.5 1.7 1.9 2.1 2.3 2.5
Percent range
Number of participants
2026
20
18
16
14
12
10
8
6
4
2
0.4− 0.6− 0.8− 1.0− 1.2− 1.4− 1.6− 1.8− 2.0− 2.2− 2.4−
0.5 0.7 0.9 1.1 1.3 1.5 1.7 1.9 2.1 2.3 2.5
Percent range
Number of participants
2027
20
18
16
14
12
10
8
6
4
2
0.4− 0.6− 0.8− 1.0− 1.2− 1.4− 1.6− 1.8− 2.0− 2.2− 2.4−
0.5 0.7 0.9 1.1 1.3 1.5 1.7 1.9 2.1 2.3 2.5
Percent range
Number of participants
Longer run
20
18
16
14
12
10
8
6
4
2
0.4− 0.6− 0.8− 1.0− 1.2− 1.4− 1.6− 1.8− 2.0− 2.2− 2.4−
0.5 0.7 0.9 1.1 1.3 1.5 1.7 1.9 2.1 2.3 2.5
Percent range
Note: Definitionsofvariablesandotherexplanationsareinthenotestotable1.
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Figure3.B.Distributionofparticipants’projectionsfortheunemploymentrate,2025–27andoverthelongerrun
Number of participants
2025
20
March projections 18
December projections 16
14
12
10
8
6
4
2
3.2− 3.4− 3.6− 3.8− 4.0− 4.2− 4.4− 4.6−
3.3 3.5 3.7 3.9 4.1 4.3 4.5 4.7
Percent range
Number of participants
2026
20
18
16
14
12
10
8
6
4
2
3.2− 3.4− 3.6− 3.8− 4.0− 4.2− 4.4− 4.6−
3.3 3.5 3.7 3.9 4.1 4.3 4.5 4.7
Percent range
Number of participants
2027
20
18
16
14
12
10
8
6
4
2
3.2− 3.4− 3.6− 3.8− 4.0− 4.2− 4.4− 4.6−
3.3 3.5 3.7 3.9 4.1 4.3 4.5 4.7
Percent range
Number of participants
Longer run
20
18
16
14
12
10
8
6
4
2
3.2− 3.4− 3.6− 3.8− 4.0− 4.2− 4.4− 4.6−
3.3 3.5 3.7 3.9 4.1 4.3 4.5 4.7
Percent range
Note: Definitionsofvariablesandotherexplanationsareinthenotestotable1.
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Figure3.C.Distributionofparticipants’projectionsforPCEinflation,2025–27andoverthelongerrun
Number of participants
2025
20
March projections 18
December projections 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−
1.8 2.0 2.2 2.4 2.6 2.8 3.0 3.2 3.4
Percent range
Number of participants
2026
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−
1.8 2.0 2.2 2.4 2.6 2.8 3.0 3.2 3.4
Percent range
Number of participants
2027
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−
1.8 2.0 2.2 2.4 2.6 2.8 3.0 3.2 3.4
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−
1.8 2.0 2.2 2.4 2.6 2.8 3.0 3.2 3.4
Percent range
Note: Definitionsofvariablesandotherexplanationsareinthenotestotable1.
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Figure3.D.Distributionofparticipants’projectionsforcorePCEinflation,2025–27
Number of participants
2025
20
March projections 18
December projections
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−
1.8 2.0 2.2 2.4 2.6 2.8 3.0 3.2 3.4 3.6
Percent range
Number of participants
2026
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−
1.8 2.0 2.2 2.4 2.6 2.8 3.0 3.2 3.4 3.6
Percent range
Number of participants
2027
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−
1.8 2.0 2.2 2.4 2.6 2.8 3.0 3.2 3.4 3.6
Percent range
Note: Definitionsofvariablesandotherexplanationsareinthenotestotable1.
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Figure3.E.Distributionofparticipants’judgmentsofthemidpointoftheappropriatetargetrangeforthe
federalfundsrateortheappropriatetargetlevelforthefederalfundsrate,2025–27andoverthelongerrun
Number of participants
2025
20
March projections 18
December projections 16
14
12
10
8
6
4
2
2.13− 2.38− 2.63− 2.88− 3.13− 3.38− 3.63− 3.88− 4.13− 4.38−
2.37 2.62 2.87 3.12 3.37 3.62 3.87 4.12 4.37 4.62
Percent range
Number of participants
2026
20
18
16
14
12
10
8
6
4
2
2.13− 2.38− 2.63− 2.88− 3.13− 3.38− 3.63− 3.88− 4.13− 4.38−
2.37 2.62 2.87 3.12 3.37 3.62 3.87 4.12 4.37 4.62
Percent range
Number of participants
2027
20
18
16
14
12
10
8
6
4
2
2.13− 2.38− 2.63− 2.88− 3.13− 3.38− 3.63− 3.88− 4.13− 4.38−
2.37 2.62 2.87 3.12 3.37 3.62 3.87 4.12 4.37 4.62
Percent range
Number of participants
Longer run
20
18
16
14
12
10
8
6
4
2
2.13− 2.38− 2.63− 2.88− 3.13− 3.38− 3.63− 3.88− 4.13− 4.38−
2.37 2.62 2.87 3.12 3.37 3.62 3.87 4.12 4.37 4.62
Percent range
Note: Definitionsofvariablesandotherexplanationsareinthenotestotable1.
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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
5
Actual 4
3
2
1
0
−1
−2
Median of projections −3
70% confidence interval
2020 2021 2022 2023 2024 2025 2026 2027
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
March projections 20 March projections 20
December projections December 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.”
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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
7
6
Actual 5
4
3
2
Median of projections 1
70% confidence interval
2020 2021 2022 2023 2024 2025 2026 2027
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
March projections 20 March projections 20
December projections December 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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Figure 4.C. Uncertainty and risks in projections of PCE inflation
Median projection and confidence interval based on historical forecast errors
Percent
PCE inflation
7
6
5
Actual
4
3
2
1
Median of projections 0
70% confidence interval
2020 2021 2022 2023 2024 2025 2026 2027
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
March projections 20 March projections 20
December projections December 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
March projections 20 March projections 20
December projections December 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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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 2023 2024 2025
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 2023 2024 2025
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 2023 2024 2025
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 2023 2024 2025
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.
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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 2023 2024 2025
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 2023 2024 2025
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 2023 2024 2025
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 2023 2024 2025
Note: ForeachSEP,participantsprovidedresponsestothequestion“Pleaseindicateyourjudgmentoftherisk
weightingaroundyourprojections.” Eachpointinthediffusionindexesrepresentsthenumberofparticipantswho
responded“WeightedtotheUpside”minusthenumberwhoresponded“WeightedtotheDownside,”dividedbythe
totalnumberofparticipants. FigureexcludesMarch2020whennoprojectionsweresubmitted.
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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
2
1
Actual
0
2020 2021 2022 2023 2024 2025 2026 2027
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.
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Table 2. Average Historical Projection Error Ranges
(Percentage points)
Variable 2025 2026 2027
Change in real GDP1 .............. ±1.5 ±2.0 ±2.2
Unemployment rate1 .............. ±0.8 ±1.4 ±1.9
Total consumer prices2 ............ ±1.4 ±1.8 ±1.8
Short-term interest rates3 ......... ±0.9 ±2.0 ±2.5
Note: Error ranges shown are measured as plus or minus the root mean
squarederrorofprojectionsfor2005through2024thatwerereleasedinthespring
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, March 19, 2025
Forecast Uncertainty
The economic projections provided by the members of tions are summarized in the bottom-left panels of those fig-
the Board of Governors and the presidents of the Federal ures. Participants also provide judgments as to whether the
Reserve Banks inform discussions of monetary policy among risks to their projections are weighted to the upside, are
policymakers and can aid public understanding of the basis weighted to the downside, or are broadly balanced. That is,
for policy actions. Considerable uncertainty attends these while the symmetric historical fan charts shown in the top
projections, however. The economic and statistical models panels of figures 4.A through 4.C imply that the risks to par-
and relationships used to help produce economic forecasts ticipants’ projections are balanced, participants may judge that
are necessarily imperfect descriptions of the real world, and there is a greater risk that a given variable will be above rather
the future path of the economy can be affected by myriad than below their projections. These judgments are summa-
unforeseen developments and events. Thus, in setting the rized in the lower-right panels of figures 4.A through 4.C.
stance of monetary policy, participants consider not only As with real activity and inflation, the outlook for the
what appears to be the most likely economic outcome as em- future path of the federal funds rate is subject to considerable
bodied in their projections, but also the range of alternative uncertainty. This uncertainty arises primarily because each
possibilities, the likelihood of their occurring, and the poten- participant’s assessment of the appropriate stance of mone-
tial costs to the economy should they occur. tary policy depends importantly on the evolution of real ac-
Table 2 summarizes the average historical accuracy of a tivity and inflation over time. If economic conditions evolve
range of forecasts, including those reported in past Monetary in an unexpected manner, then assessments of the appropri-
Policy Reports and those prepared by the Federal Reserve ate setting of the federal funds rate would change from that
Board’s staff in advance of meetings of the Federal Open point forward. The final line in table 2 shows the error ranges
Market Committee (FOMC). The projection error ranges for forecasts of short-term interest rates. They suggest that
shown in the table illustrate the considerable uncertainty as- the historical confidence intervals associated with projections
sociated with economic forecasts. For example, suppose a of the federal funds rate are quite wide. It should be noted,
participant projects that real gross domestic product (GDP) however, that these confidence intervals are not strictly con-
and total consumer prices will rise steadily at annual rates of, sistent with the projections for the federal funds rate, as these
respectively, 3 percent and 2 percent. If the uncertainty at- projections are not forecasts of the most likely quarterly out-
tending those projections is similar to that experienced in the comes but rather are projections of participants’ individual as-
past and the risks around the projections are broadly bal- sessments of appropriate monetary policy and are on an end-
anced, the numbers reported in table 2 would imply a prob- of-year basis. However, the forecast errors should provide a
ability of about 70 percent that actual GDP would expand sense of the uncertainty around the future path of the federal
within a range of 1.5 to 4.5 percent in the current year, 1.0 to funds rate generated by the uncertainty about the macroeco-
5.0 percent in the second year, and 0.8 to 5.2 percent in the nomic variables as well as additional adjustments to monetary
third year. The corresponding 70 percent confidence inter- policy that would be appropriate to offset the effects of
vals for overall inflation would be 0.6 to 3.4 percent in the shocks to the economy.
current year and 0.2 to 3.8 percent in the second and third If at some point in the future the confidence interval
years. Figures 4.A through 4.C illustrate these confidence around the federal funds rate were to extend below zero, it
bounds in “fan charts” that are symmetric and centered on would be truncated at zero for purposes of the fan chart
the medians of FOMC participants’ projections for GDP shown in figure 5; zero is the bottom of the lowest target
growth, the unemployment rate, and inflation. However, in range for the federal funds rate that has been adopted by the
some instances, the risks around the projections may not be Committee in the past. This approach to the construction of
symmetric. In particular, the unemployment rate cannot be the federal funds rate fan chart would be merely a convention;
negative; furthermore, the risks around a particular projec- it would not have any implications for possible future policy
tion might be tilted to either the upside or the downside, in decisions regarding the use of negative interest rates to pro-
which case the corresponding fan chart would be asymmet- vide additional monetary policy accommodation if doing so
rically positioned around the median projection. were appropriate. In such situations, the Committee could
Because current conditions may differ from those that also employ other tools, including forward guidance and asset
prevailed, on average, over history, participants provide purchases, to provide additional accommodation.
judgments as to whether the uncertainty attached to their While figures 4.A through 4.C provide information on
projections of each economic variable is greater than, smaller the uncertainty around the economic projections, figure 1
than, or broadly similar to typical levels of forecast uncer- provides information on the range of views across FOMC
tainty seen in the past 20 years, as presented in table 2 and participants. A comparison of figure 1 with figures 4.A
reflected in the widths of the confidence intervals shown in through 4.C shows that the dispersion of the projections
the top panels of figures 4.A through 4.C. Participants’ cur- across participants is much smaller than the average forecast
rent assessments of the uncertainty surrounding their projec- errors over the past 20 years.
Page 17 of 17
Cite this document
APA
Federal Reserve (2025, March 18). Summary of Economic Projections. Sep, Federal Reserve. https://whenthefedspeaks.com/doc/sep_20250319
BibTeX
@misc{wtfs_sep_20250319,
author = {Federal Reserve},
title = {Summary of Economic Projections},
year = {2025},
month = {Mar},
howpublished = {Sep, Federal Reserve},
url = {https://whenthefedspeaks.com/doc/sep_20250319},
note = {Retrieved via When the Fed Speaks corpus}
}