Full text of Federal Open Market Committee Meeting Minutes, Transcripts, and Other Documents : Meeting, December 11-12, 2012 : Summary of Economic Projections - Compilation and Summary of Individual Economic Projections

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SEP: Compilation and Summary of Individual Economic Projections

December 11–12, 2012

Table 1. Economic projections of Federal Reserve Board members and Federal Reserve Bank presidents,
December 2012
Percent

2012
Change in real GDP . . . . . . . . . . . 1.7 to 1.8
September projection . . . . . . 1.7 to 2.0

Central tendency1
2013
2014
2015
2.3 to 3.0 3.0 to 3.5 3.0 to 3.7
2.5 to 3.0 3.0 to 3.8 3.0 to 3.8

Unemployment rate . . . . . . . . . . . 7.8 to 7.9
September projection . . . . . . 8.0 to 8.2

7.4 to 7.7
7.6 to 7.9

6.8 to 7.3
6.7 to 7.3

PCE inflation . . . . . . . . . . . . . . . . . 1.6 to 1.7
September projection . . . . . . 1.7 to 1.8

1.3 to 2.0
1.6 to 2.0

Core PCE inflation3 . . . . . . . . . . . 1.6 to 1.7
September projection . . . . . . 1.7 to 1.9

1.6 to 1.9
1.7 to 2.0

Variable

Longer run
2.3 to 2.5
2.3 to 2.5

2012
1.6 to 2.0
1.6 to 2.0

2013
2.0 to 3.2
2.3 to 3.5

Range2
2014
2.8 to 4.0
2.7 to 4.1

6.0 to 6.6
6.0 to 6.8

5.2 to 6.0
5.2 to 6.0

7.7 to 8.0
8.0 to 8.3

6.9 to 7.8
7.0 to 8.0

6.1 to 7.4
6.3 to 7.5

5.7 to 6.8
5.7 to 6.9

5.0 to 6.0
5.0 to 6.3

1.5 to 2.0
1.6 to 2.0

1.7 to 2.0
1.8 to 2.0

2.0
2.0

1.6 to 1.8
1.5 to 1.9

1.3 to 2.0
1.5 to 2.1

1.4 to 2.2
1.6 to 2.2

1.5 to 2.2
1.8 to 2.3

2.0
2.0

1.6 to 2.0
1.8 to 2.0

1.8 to 2.0
1.9 to 2.0

1.6 to 1.8
1.6 to 2.0

1.5 to 2.0
1.6 to 2.0

1.5 to 2.0
1.6 to 2.2

1.7 to 2.2
1.8 to 2.3

2015
2.5 to 4.2
2.5 to 4.2

Longer run
2.2 to 3.0
2.2 to 3.0

Note: Projections of change in real gross domestic product (GDP) and projections for both measures of inflation are from the fourth 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, the price index for personal consumption
expenditures (PCE) and the price index for PCE excluding food and energy. Projections for the unemployment rate are for the average civilian unemployment rate in the
fourth quarter of the year indicated. Each participant’s projections are based on his or her assessment of appropriate monetary policy. Longer-run projections represent each
participant’s assessment of the rate to which each variable would be expected to converge under appropriate monetary policy and in the absence of further shocks to the
economy. The September projections were made in conjunction with the meeting of the Federal Open Market Committee on September 12–13, 2012.
1. The central tendency excludes the three highest and three lowest projections for each variable in each year.
2. The range for a variable in a given year includes all participants’ projections, from lowest to highest, for that variable in that year.
3. Longer-run projections for core PCE inflation are not collected.

Authorized for Public Release – Page 1 of 47

SEP: Compilation and Summary of Individual Economic Projections

December 11–12, 2012

Table 1.A. Economic projections for the first half of 2012*
(in percent)

Central tendencies and ranges
Central tendency

Range

1.6
1.6
2.0

1.6
1.6
2.0

Change in real GDP
PCE inflation
Core PCE inflation

Participants’ projections
Projection

Change in real GDP

PCE inflation

Core PCE inflation

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19

1.6
1.6
1.6
1.6
1.6
1.6
1.6
1.6
1.6
1.6
1.6
1.6
1.6
1.6
1.6
1.6
1.6
1.6
1.6

1.6
1.6
1.6
1.6
1.6
1.6
1.6
1.6
1.6
1.6
1.6
1.6
1.6
1.6
1.6
1.6
1.6
1.6
1.6

2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2

* Growth and inflation are reported at annualized rates.

Authorized for Public Release – Page 2 of 47

SEP: Compilation and Summary of Individual Economic Projections

December 11–12, 2012

Table 1.B. Economic projections for the second half of 2012*
(in percent)

Central tendencies and ranges
Central tendency

Range

1.8 to 2.0
1.6 to 1.8
1.2 to 1.4

1.6 to 2.4
1.6 to 2.0
1.2 to 1.6

Change in real GDP
PCE inflation
Core PCE inflation

Participants’ projections
Projection

Change in real GDP

PCE inflation

Core PCE inflation

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19

1.6
2.0
1.8
1.8
1.8
2.0
1.8
2.0
2.0
1.8
1.8
1.8
1.8
1.8
1.8
1.8
1.6
2.4
2.0

1.6
1.8
1.6
1.6
1.8
1.8
1.6
1.8
1.8
1.6
1.6
1.6
1.6
1.6
1.6
1.6
1.8
2.0
1.6

1.2
1.2
1.6
1.2
1.2
1.4
1.2
1.4
1.4
1.2
1.2
1.2
1.2
1.2
1.2
1.2
1.2
1.6
1.2

* Projections for the second half of 2012 implied by participants’ December projections for the first half of 2012
and for 2012 as a whole. Growth and inflation are reported at annualized rates.

Authorized for Public Release – Page 3 of 47

SEP: Compilation and Summary of Individual Economic Projections

December 11–12, 2012

Table 2. December economic projections, 2012–15 and over the longer run
(in percent)
Projection

Year

Change in
real GDP

Unemployment
PCE
rate
inflation

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19

2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012

1.6
1.8
1.7
1.7
1.7
1.8
1.7
1.8
1.8
1.7
1.7
1.7
1.7
1.7
1.7
1.7
1.6
2.0
1.8

7.8
7.8
7.9
8.0
7.8
7.8
7.8
7.8
7.9
7.9
7.7
7.8
7.8
7.8
7.8
7.8
7.8
7.8
7.9

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19

2013
2013
2013
2013
2013
2013
2013
2013
2013
2013
2013
2013
2013
2013
2013
2013
2013
2013
2013

2.4
2.5
2.2
2.5
3.0
3.2
2.9
2.5
2.3
2.8
2.7
3.0
2.4
2.7
2.1
2.6
2.0
3.0
2.8

7.5
7.4
7.8
7.8
7.5
7.0
7.3
7.4
7.6
7.6
7.5
7.4
7.5
7.7
7.7
7.5
7.6
6.9
7.5

Core PCE
inflation

Federal
funds rate

1.6
1.7
1.6
1.6
1.7
1.7
1.6
1.7
1.7
1.6
1.6
1.6
1.6
1.6
1.6
1.6
1.7
1.8
1.6

1.6
1.6
1.8
1.6
1.6
1.7
1.6
1.7
1.7
1.6
1.6
1.6
1.6
1.6
1.6
1.6
1.6
1.8
1.6

0.13
0.13
0.13
0.13
0.13
0.13
0.13
0.13
0.13
0.13
0.13
0.13
0.13
0.13
0.13
0.13
0.13
0.13
0.13

1.8
1.6
1.5
1.3
1.6
2.0
1.3
2.0
1.9
1.5
1.3
1.9
2.0
1.4
1.4
1.4
1.8
2.0
1.3

1.7
1.6
1.5
1.6
1.8
2.0
1.6
1.9
1.9
1.7
1.6
1.9
1.7
1.7
1.7
1.6
1.8
2.0
1.6

0.13
0.13
0.13
0.13
0.13
0.13
0.13
0.50
0.13
0.13
0.13
0.13
0.13
0.13
0.13
0.13
0.13
1.00
0.13

Authorized for Public Release – Page 4 of 47

SEP: Compilation and Summary of Individual Economic Projections

December 11–12, 2012

Table 2. (continued)
Projection

Year

Change in
real GDP

Unemployment
PCE
rate
inflation

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19

2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014
2014

3.6
3.2
3.3
3.2
4.0
3.2
3.5
2.8
2.9
3.2
3.8
3.2
3.1
3.4
3.1
3.3
2.8
3.0
3.5

6.4
6.8
7.3
7.4
6.8
6.1
6.8
6.8
7.0
7.1
7.1
7.0
7.1
7.2
7.4
7.0
7.3
6.2
7.0

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19

2015
2015
2015
2015
2015
2015
2015
2015
2015
2015
2015
2015
2015
2015
2015
2015
2015
2015
2015

3.5
3.4
3.5
3.6
4.2
2.8
3.8
2.9
3.0
3.5
3.7
3.2
3.1
3.7
3.6
3.5
3.5
2.5
3.4

5.7
6.2
6.8
6.5
6.0
6.0
6.1
6.4
6.3
6.5
6.0
6.6
6.7
6.2
6.5
6.3
6.8
6.0
6.2

Core PCE
inflation

Federal
funds rate

2.2
2.0
1.5
1.4
2.0
2.0
1.6
2.0
2.0
1.7
1.4
2.0
1.8
1.6
1.7
1.6
2.0
2.0
1.5

2.0
2.0
1.5
1.6
2.0
2.0
1.7
2.0
2.0
1.8
1.6
2.0
1.6
1.8
1.9
1.7
2.0
2.0
1.7

0.13
0.13
0.13
0.13
0.13
1.75
0.13
1.50
0.13
0.13
0.13
0.50
0.13
0.13
0.13
0.13
1.50
2.75
0.13

2.0
2.1
2.2
1.5
2.2
2.0
1.9
2.0
2.0
1.9
1.6
2.0
1.8
1.7
1.9
1.7
2.0
2.0
1.6

2.0
2.1
2.0
1.7
2.2
2.0
1.8
2.0
2.0
1.8
1.8
2.0
1.7
1.9
2.1
1.8
2.0
2.0
1.8

1.00
0.13
0.50
0.75
0.75
3.75
1.00
2.50
1.25
0.50
1.25
2.00
0.50
0.50
0.50
1.00
3.50
4.50
0.75

Authorized for Public Release – Page 5 of 47

SEP: Compilation and Summary of Individual Economic Projections

December 11–12, 2012

Table 2. (continued)
Projection

Year

Change in
real GDP

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19

LR
LR
LR
LR
LR
LR
LR
LR
LR
LR
LR
LR
LR
LR
LR
LR
LR
LR
LR

2.3
2.3
2.2
3.0
2.5
2.3
2.3
2.3
2.5
2.3
2.3
2.5
2.5
2.5
2.5
2.2
2.3
2.5
2.5

Unemployment
PCE
rate
inflation
5.0
6.0
5.5
5.4
5.2
6.0
5.3
5.5
5.2
5.5
6.0
5.5
6.0
5.3
5.2
5.4
6.0
6.0
5.8

Core PCE
inflation

2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0

Authorized for Public Release – Page 6 of 47

Federal
funds rate
3.50
3.75
4.00
3.80
4.00
4.25
3.80
4.30
4.50
4.30
4.50
4.00
4.00
3.00
4.00
4.20
4.25
4.50
4.25

SEP: Compilation and Summary of Individual Economic Projections

December 11–12, 2012

Table 2 Appendix. Assessments of participants who, under appropriate
monetary policy, judge that the federal funds rate will not be raised until
after 2015
Projection

Year of first
increase

Change in
real GDP

2

2016

3.4

Unemployment
rate
5.5

PCE
inflation

Core PCE
inflation

Federal
funds rate

2.2

2.2

0.5

Authorized for Public Release – Page 7 of 47

SEP: Compilation and Summary of Individual Economic Projections

December 11–12, 2012

Figure 1.A. Central tendencies and ranges of economic projections, 2012–15 and over the longer run
Percent

Change in real GDP

5

Central tendency of projections
Range of projections

4
3
2
1
+
0
1

Actual

2
3

2007

2008

2009

2010

2011

2012

2013

2014

2015

Longer
run
Percent

Unemployment rate

10
9
8
7
6
5

2007

2008

2009

2010

2011

2012

2013

2014

2015

Longer
run
Percent

PCE inflation
3

2

1

2007

2008

2009

2010

2011

2012

2013

2014

2015

Longer
run
Percent

Core PCE inflation
3

2

1

2007

2008

2009

2010

2011

2012

2013

2014

2015

Longer
run

Note: Definitions of variables are in the general note to table 1. The data for the actual values of the variables are
annual.

Authorized for Public Release – Page 8 of 47

SEP: Compilation and Summary of Individual Economic Projections

December 11–12, 2012

Figure 1.B. Central tendencies and ranges of economic projections, 2012–15 and over the longer run

Percent

Change in real GDP

5

Central tendency of projections
Range of projections

4
3
2
1
+
0
1

Actual

2
3

2007

2008

2009

2010

2011

2012

2013

2014

2015

Longer
run
Percent

Unemployment rate

10
9
8
7
6
5

2007

2008

2009

2010

2011

2012

2013

2014

2015

Longer
run
Percent

PCE inflation

5
4
3
2
1
+
0
-

2007

2008

2009

2010

2011

2012

2013

2014

2015

Longer
run

Note: Definitions of variables are in the general note to table 1. The data for the actual values of the variables are
annual.

Authorized for Public Release – Page 9 of 47

SEP: Compilation and Summary of Individual Economic Projections

December 11–12, 2012

Figure 2. Overview of FOMC participants’ assessments of appropriate monetary policy, December 2012

Number of participants

Appropriate timing of policy firming

13

13
12
11
10
9
8
7
6
5
4

3

3

2

2
1

2013

2014

2015

1

2016

Appropriate pace of policy firming

Percent

Target federal funds rate at year-end

6

5

4

3

2

1

0

2012

2013

2014

2015

Longer run

Note: In the upper panel, the height of each bar denotes the number of FOMC participants who judge that, under
appropriate monetary policy, the first increase in the target federal funds rate from its current range of 0 to 1/4 percent
will occur in the specified calendar year. In September 2012, the numbers of FOMC participants who judged that the
first increase in the target federal funds rate would occur in 2012, 2013, 2014, 2015, and 2016 were, respectively, 1, 3,
2, 12, and 1. In the lower panel, each shaded circle indicates the value (rounded to the nearest 1/4 percentage point) of
an individual participant’s judgment of the appropriate level of the target federal funds rate at the end of the specified
calendar year or over the longer run.

Authorized for Public Release – Page 10 of 47

SEP: Compilation and Summary of Individual Economic Projections

December 11–12, 2012

Figure 4.A. Uncertainty and risks – GDP growth

2(a): Please indicate your judgment of the uncertainty attached to your projections
relative to levels of uncertainty over the past 20 years.
Number of participants

20

December projections
September projections

18
16
14
12
10
8
6
4
2

Lower
(C)

Broadly similar
(B)

Higher
(A)

2(b): Please indicate your judgment of the risk weighting around your projections.
Number of participants

20

December projections
September projections

18
16
14
12
10
8
6
4
2

Weighted to downside
(C)

Broadly balanced
(B)

Weighted to upside
(A)

Individual responses
Respondent

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

2(a)
2(b)

A
C

A
C

A
B

A
C

A
C

B
B

A
C

A
B

A
C

A
C

A
B

A
B

A
C

A
C

A
C

A
C

A
C

A
B

A
C

Authorized for Public Release – Page 11 of 47

SEP: Compilation and Summary of Individual Economic Projections

December 11–12, 2012

Figure 4.B. Uncertainty and risks – Unemployment rate

2(a): Please indicate your judgment of the uncertainty attached to your projections
relative to levels of uncertainty over the past 20 years.
Number of participants

20

December projections
September projections

18
16
14
12
10
8
6
4
2

Lower
(C)

Broadly similar
(B)

Higher
(A)

2(b): Please indicate your judgment of the risk weighting around your projections.
Number of participants

20

December projections
September projections

18
16
14
12
10
8
6
4
2

Weighted to downside
(C)

Broadly balanced
(B)

Weighted to upside
(A)

Individual responses
Respondent

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

2(a)
2(b)

A
A

A
A

A
B

A
A

A
A

B
B

A
A

A
B

A
A

A
A

A
B

A
B

A
A

A
A

A
A

A
A

A
A

B
B

A
A

Authorized for Public Release – Page 12 of 47

SEP: Compilation and Summary of Individual Economic Projections

December 11–12, 2012

Figure 4.C. Uncertainty and risks – PCE inflation

2(a): Please indicate your judgment of the uncertainty attached to your projections
relative to levels of uncertainty over the past 20 years.
Number of participants

20

December projections
September projections

18
16
14
12
10
8
6
4
2

Lower
(C)

Broadly similar
(B)

Higher
(A)

2(b): Please indicate your judgment of the risk weighting around your projections.
Number of participants

20

December projections
September projections

18
16
14
12
10
8
6
4
2

Weighted to downside
(C)

Broadly balanced
(B)

Weighted to upside
(A)

Individual responses
Respondent

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

2(a)
2(b)

A
B

A
C

B
B

A
B

B
B

B
B

A
B

A
A

B
B

B
B

B
B

B
B

B
B

A
C

B
C

C
B

C
B

A
A

B
B

Authorized for Public Release – Page 13 of 47

SEP: Compilation and Summary of Individual Economic Projections

December 11–12, 2012

Figure 4.D. Uncertainty and risks – Core PCE inflation

2(a): Please indicate your judgment of the uncertainty attached to your projections
relative to levels of uncertainty over the past 20 years.
Number of participants

20

December projections
September projections

18
16
14
12
10
8
6
4
2

Lower
(C)

Broadly similar
(B)

Higher
(A)

2(b): Please indicate your judgment of the risk weighting around your projections.
Number of participants

20

December projections
September projections

18
16
14
12
10
8
6
4
2

Weighted to downside
(C)

Broadly balanced
(B)

Weighted to upside
(A)

Individual responses
Respondent

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

2(a)
2(b)

A
B

A
C

B
B

A
B

B
B

B
B

A
B

A
A

B
B

B
B

B
B

B
B

B
B

A
C

B
C

C
B

C
B

A
A

B
B

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Longer-run Projections
1(c). If you anticipate that the convergence process will take SHORTER
OR LONGER than about fve or six years, please indicate below your best
estimate of the duration of the convergence process. You may also include
below any other explanatory comments that you think would be helpful.
Respondent 1: Our current estimate of the economy’s potential growth rate is in the 2% to 2 1/2%
range. By 2017-18 we anticipate a potential growth rate of around 2 1/4%. A reasonable estimate of
the long-run unemployment rate is 4% to 6%. Assuming appropriate policy and no further signifcant
shocks, we expect the unemployment rate to be in this range and the output gap to be around zero by
2017-18; analysis of recent long expansions (1980s and 1990s) suggests the unemployment rate could
be somewhat below 5% in 5-6 years time.
We assume that long-term infation expectations will continue to be anchored around 2.5% on a
CPI basis and that the FOMC’s infation objective will remain at 2% for the PCE defator (equivalent
to about 2.5% for the CPI). Under these conditions and with the output gap anticipated to be near
zero, we expect infation as measured by the PCE defator to be close to 2% in 2017-18.
Respondent 2: Under appropriate policy, the convergence would be faster than fve years.
Respondent 3: N/A
Respondent 4: N/A
Respondent 5: N/A
Respondent 6: I anticipate a shorter convergence process than 5 years for all three variables. Real
GDP growth will converge in 2016, the unemployment rate in 2015, and the PCE in 2013.
Respondent 7: Convergence to the longer-run levels of the unemployment rate and infation is
expected in about 5 years.
Respondent 8: N/A
Respondent 9: N/A
Respondent 10: N/A
Respondent 11: N/A
Respondent 12: In the absence of new shocks, convergence is likely to be completed within six
years.
Respondent 13: N/A
Respondent 14: N/A
Respondent 15: N/A

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Respondent 16: NA
Respondent 17: N/A
Respondent 18: The convergence process may be somewhat shorter than 5-6 years
Respondent 19: N/A

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Uncertainty and Risks
2(a). (Optional) If you have any explanatory comments regarding your
judgment of the uncertainty attached to your projections relative to levels
of uncertainty over the past 20 years, you may enter them below.
Respondent 1: Quantitative judgment based on the width of the probability intervals from the
FRBNY forecast distribution for GDP growth and core PCE infation relative to the forecast errors
over the last 20 years. These measures from the FRBNY forecast distribution have not changed signifcantly from the September SEP. These measures also refect our view of the appropriate monetary
policy stance providing insurance against realizations of some of the downside risks; otherwise, the
uncertainty would be even higher.
Respondent 2: N/A
Respondent 3: High level of uncertainty around the legislative resolution of pending fscal issues.
This political contingency carries a greater range of plausible outcomes, with substantially varying
eects on the economy, than is usually the case with purely economic uncertainties.
Respondent 4: I have changed my judgment of the level of uncertainty attached to my infation
projections from “broadly similar” to “higher”. My level of uncertainty is a refection of what could
constitute dierent infation dynamics resulting from the longer period of monetary accommodation
and a growing central bank balance sheet. While I do not concede that such infation dynamics should
in any way be dierent in the current policy environment, the manner in which the FOMC and future
FOMC’s communicate the infation potential or lack of potential could have a bearing in how markets,
businesses and households will continue to react to shocks that might otherwise represent transitory
price increases.
Respondent 5: N/A
Respondent 6: N/A
Respondent 7: N/A
Respondent 8: Several factors contribute to heightened uncertainty, including the European debt
crisis, U.S. fscal policy (fscal cli, debt ceiling, longer-term), slowing world growth, and ongoing
changes in the regulatory environment. In addition, the Federal Reserve’s unconventional policies are
a source of uncertainty because they have no precedent.
Respondent 9: N/A
Respondent 10: Uncertainties associated with real economic activity and employment include US
fscal policy (fscal cli/debt limit), developments in Europe, Iran/oil, EME growth, and our lack
of experience with recoveries from fnancial crises in developed economies and with unconventional
monetary policies. Core infation is well anchored by stable infation expectations, and commodity
price fuctuations do not seem exceptionally unusual lately or prospectively (except possibly for Middle
East developments that could aect oil prices), so uncertainty about infation is in the normal range,
possibly even slightly lower.

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Respondent 11: N/A
Respondent 12: Continuing fscal and regulatory uncertainty make forecasting how slack and GDP
growth will evolve next year almost pure guesswork.
Respondent 13: I believe the uncertainty surrounding my forecasts of GDP growth and unemployment remain elevated relative to the norms of the last 20 years, primarily refecting the recession in
Europe and the fscal problems facing the United States next year.
Respondent 14: N/A
Respondent 15: N/A
Respondent 16: Uncertainty about my projections for economic activity is elevated relative to its
average over the past 20 years. Factors infuencing this assessment include:
(i) The “new normal” for macroeconomic relationships going forward remains unclear. For example,
there is greater uncertainty than usual about the level and growth rate of potential output.
(ii) The political resolution of the fscal cli remains unclear. The risk remains that fscal policy
could become abruptly more contractionary in January 2013.
(iii) Europe remains in a recession that is weighing on global growth. Although the situation looks
a bit better than earlier in the year, the resolution of their fnancial and economic crises remains far
o, and concerns could easily fare up again. Other key countries have also slowed this year and could
weigh further on global growth.
(iv) In the event of adverse shocks, there is limited ability for monetary and fscal policy to dampen
the eects. This limited scope for countercyclical policy implies greater variance in outcomes.
(v) Of course, there are upside risks to the outlook as well. For example, consumer sentiment
has been improving. The housing market could continue to improve even faster than I expect, which
could potentially encourage a virtuous cycle of improving confdence, fundamentals, and fnancial
conditions. Finally, a favorable outcome in fscal cli negotiations and further progress on resolving
Europe’s crises could help lift the cloud of uncertainty over the economy.
In contrast to economic activity, underlying infation is anchored by quite stable infation expectations. The stability of these expectations has been reinforced by the specifc 2 percent numerical
objective for infation. Hence, uncertainty about infation is lower than in the past two decades.
Respondent 17: The outlook for the federal budget and next year’s fscal drag are especially
uncertain. Infation expectations are probably more frmly anchored following the FOMC’s consensus
statement; under appropriate policy, uncertainty should decline further.
Respondent 18: Uncertainty about domestic fscal policy and the possibility that the European
debt crisis is not resolved in an orderly fashion continue to pose risks for the forecast. It remains
the case that the eect of the extraordinary monetary policy in place and uncertainties surrounding
the future path of policy, including the timing of the exit from accommodative policy, contribute to
uncertainty around my infation forecast.
Respondent 19: N/A

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Uncertainty and Risks (continued)
2(b). (Optional) If you have any explanatory comments regarding your
judgment of the risk weighting around your projections, you may enter
them below.
Respondent 1: Quantitative judgment based on the dierence between the central projection and
the expected value from the FRBNY forecast distribution. Under our appropriate policy stance, the
risks to the infation outlook remain roughly balanced. The balance of risks to the real activity outlook
remain to the downside. The balance of risks for infation and real activity refects our view that the
appropriate monetary policy stance in the current environment provides insurance against tail risks;
otherwise, the balance of risks for both variables would be shifted further to the downside.
Respondent 2: N/A
Respondent 3: N/A
Respondent 4: N/A
Respondent 5: Our forecast assumes that markets and the public view the Federal Reserve’s statements regarding the conditions for ending the security purchase program and for lifting the federal
funds rates as highly credible policy commitments. There is a risk, however, that some market participants doubt our resolve, or that future Committees may fail to carry through with the commitment.
Either condition would result in both output and infation running below our projection. In addition,
we assume that budget actions to avoid the full fscal cli will produce only a moderate drag on growth
and that the resolution will unlock some of the private-sector spending currently being curtailed due
to uncertainty over the cli. While it is possible that a fscal-cli resolution will strengthen aggregate demand, it is easier to envision less favorable outcomes that either produce a more pronounced
near-term drag or fail to resolve uncertainty over future tax and spending policy.
Respondent 6: N/A
Respondent 7: Risks to economic activity are skewed to the downside, as the federal budget situation and fnancial uncertainties in Europe could impose more restraint on demand, especially in the
near term.
Respondent 8: The risks to infation are skewed to the upside due to the highly accommodative
stance of monetary policy and fscal imbalances.
Respondent 9: N/A
Respondent 10: Factors cited above regarding uncertainty are mostly downside risks, including
US fscal, Europe, Iran/oil, and possible structural damage remaining from the fnancial crisis. In
addition, there is the asymmetric downside risk created by slow growth and a binding ZLB. However,
these risks seem on the whole to have moderated somewhat since the last SEP, except that US fscal
risks remain signifcant. Indeed, unexpected strength in housing, improving household sentiment, and
the possibility that US fscal issues or the European situation may be less bad than expected are
mild upside risks to real activity. Upside risk to infation comes primarily from commodity prices and
possibly underestimation of the natural rate of unemployment, but there are also downside risks from

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persistent weakness in labor and product markets, as illustrated by relatively low recent readings on
wage and price infation.
Respondent 11: N/A
Respondent 12: N/A
Respondent 13: I believe the risks are weighted primarily to the downside for GDP growth and
to the upside for unemployment. In the medium term, the potential for a severe crisis in Europe
and a fscal meltdown in the United States pose large downside risks to growth and upside risks to
unemployment. I judge the overall risks to infation to be balanced, with a downside risk that a
slowing of the economy could pull down infation and an upside risk that our large balance sheet could
eventually cause infation expectations and, in turn, infation to rise.
Respondent 14: I consider the risks to the outlook for growth to be weighted to the downside due
to the continuing potential for European developments to threaten fnancial stability and also due to
the potential adverse consequences for economic growth of a failure by Congress to successfully deal
with the impending fscal cli. The risks to unemployment are weighted to the upside. Downside risks
to growth translate into downside risks to infation. Moreover, while there is ample scope to tighten
monetary policy should upside infation risks materialize, the scope for policy to oset disinfation is
quite limited.
Respondent 15: For 2013, I see downside risk to growth and infation.
Respondent 16: Risks to growth are skewed to the downside and, consequently, to the upside for
unemployment. Key downside risks to the outlook are the looming U.S. fscal cli as well as Europe’s
recession and still-unresolved crises. In addition, negative shocks could have particularly severe eects,
because of the continuing vulnerability of the fnancial system as well as the limited ability of fscal and
monetary policy to respond to oset them. Infation risks, in contrast, are more typically balanced.
Respondent 17: In the near term, there is a non-negligible likelihood of a lengthy stalemate in
federal budget negotiations. Beyond that, other impediments to growth may be serious and persistent
enough to pull GDP growth below the path given above.
Respondent 18: I view the risks to infation as weighted to the upside over the medium and
longer run. Longer-term infation risks refect uncertainty about the timing and eÿcacy of the Fed’s
withdrawal of accommodation. The risks to output growth and unemployment are balanced. There
remains uncertainty about the eect of the fscal cli in the near term, but as that uncertainty abates,
we could see a rebound in investment spending.
Respondent 19: N/A

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Key Factors Informing Your Judgments regarding the
Appropriate Path of the Federal Funds Rate
3(c). Please describe the key factors informing your judgments regarding
the appropriate path of the federal funds rate. You may include other
comments on appropriate monetary policy here as well.
Respondent 1: The crucial factors behind our assessment of the appropriate path for monetary
policy and the FFR are the current state of the economy, our central economic outlook, and our
balance of risks around the central outlook. While there has been somewhat more noise around them
(in part because of the eects associated with Superstorm Sandy), indicators of economic conditions
generally have indicated that the expansion remains tenuous. Financial conditions are still strained
and the improvement that has occurred since mid-year is susceptible to sharp reversals if government
policy actions (both here and abroad) do not meet expectations. In these circumstances, we still see
appropriate monetary policy as “doing whatever it takes” to strengthen the economy and establish a
truly self-sustaining recovery; under such a policy, it will be the economic outcomes that will dictate
the path of the policy stance. Under our modal outlook, we anticipate that the target FFR will remain
near zero until mid-2015. We expect that long-term infation expectations will remain anchored over
this period. The pace of renormalization of the target FFR following the period of near zero policy
rates will then depend upon our assessment of economic conditions, longer-term infation expectations,
and overall fnancial conditions.
Another factor informing our assessment of the appropriate path for the target FFR is our estimate
of the equilibrium real short-term interest rate. In normal times, we assume that this rate is in the
range of 1% - 3%; adding the objective for infation (2%) then gives our estimated range for nominal
equilibrium rate as 3.0 - 5.0%. Given the recent behavior of nominal and real Treasury yields and
productivity growth, we currently see this rate over the longer run as more likely to be in the lower
half of the indicated range, which results in the point estimate given in the response to question 3(a).
Moreover, given the still-weak state of the economy and our expectations of continued strained fnancial
conditions, our assessment of the current “neutral” FFR is below our estimate of the longer-run FFR
and is expected to remain so for some time.
As discussed in our answer to question 3(e), our policy path is predicated on the assumption that
after the completion of the Maturity Extension Program (MEP) at the end of the year, the FOMC
will begin a fow-based, open-ended purchase program of long-term Treasury securities to supplement
the current agency MBS purchase program.
Respondent 2: Many (most?) of us have been comfortable with our price stability performance even
when the medium-term infation outlook is as much as 20 or 30 basis points below 2%. Presumably,
we would be just as comfortable with our performance if the medium-term outlook for infation is as
much as 20 or 30 basis points above 2%. With that in mind, I don’t see any reason to begin removing
accommodation until the medium-term outlook for infation rises above 2.25%. I don’t see the outlook
for infation as being that high until the latter half of 2016. Such an (appropriately) accommodative
policy will produce a faster decline in the unemployment rate - it will fall to 5.5% by the end of 2016.
Respondent 3: N/A
Respondent 4: The key factors informing my judgment regarding a slow lift-o of the federal funds
rate in 2015 include review of a set of economic indicators that together do not yet suggest that a
“virtuous cycle” is frmly underway that would justify an early monetary policy contraction. While
frms are hiring, they seem to be doing so tentatively, and their level of confdence in a stronger

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economy remains low. For their part, households are enjoying more wealth eects, but confdence
has dropped and real disposable incomes remain fat. Government spending is uncertain, but fscal
impetus will likely not be substantial enough to provide necessary stimulus. Investment spending is
poor and net exports are not showing through as signifcant. Accordingly, my view of appropriate
monetary policy is that it must remain accommodative as long as it can continue to deliver growthsupporting benefts that exceed any costs in terms of price stability, fnancial stability and market
functioning.
Respondent 5: Our appropriate path for monetary policy includes an explicit numerical threshold
commitment to maintain the funds rate at its current level at least as long as the unemployment rate
remains above 6-1/2 percent and the outlook for infation over the next two years remains under 2-1/2
percent. We feel these markers would be achieved some time after the economic recovery strengthens
and there has been a substantial improvement in labor markets.
Under appropriate policy, reaching such thresholds would not automatically trigger an increase in
the funds rate. For example, policy could remain on hold if the outlook for infation fell well short of
our 2 percent target upon reaching the 6-1/2 percent unemployment mark.
With regard to our balance sheet, we assume that the “substantial improvement in labor market
conditions” condition for ending the open-ended asset purchase program would be met when gains in
payroll employment averaged at least 200,000 per month for a period of about 6 months, with these
gains accompanied by GDP growth in excess of potential and sustained downward momentum in the
unemployment rate. Under our projection, this occurs at the end of 2013.
Respondent 6: Assuming appropriate policy and my views on the convergence process, my judgment is that the lift-o of the federal funds rate should occur in Q2/2014.
Respondent 7: Lifto from the zero-lower-bound occurs around mid-2015, when the unemployment
rate is expected to fall below 6.5 percent and the economy continues to grow above potential.
Respondent 8: Key factors informing my judgment regarding the appropriate path of monetary
policy are achieving an infation objective of 2 percent and ensuring a sustainable economy recovery
that reduces unemployment. To maintain the stability of long-run infation expectations and fnancial
stability, I anticipate it will be necessary to begin the process of normalizing the federal funds rate in
late 2013.
Respondent 9: I expect the federal funds rate to remain in the 0 to 25 basis point range at least as
long as the unemployment rate exceeds 6 1/2 percent, providing that infation is projected to be close
to the Committee’s 2 percent objective in the medium term and longer-term infation expectations
continue to be anchored.
Respondent 10: Projected path consistent with thresholds guidance and optimal control simulations. I assume asset purchases continue into the second half of 2013.
Respondent 11: Unemployment reaches 6.5% in mid-2015 and lift-o begins. The fed funds target
at the end of 2015 is consistent with the outcome based rule and with the inertial Taylor rule in
Tealbook Book B. I have assumed increases in the fed funds target of .25% at each meeting once
lift-o begins.

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Respondent 12: “Appropriate policy” cannot be captured by a time-path for the federal funds rate.
An important part of “appropriate policy” is communicating a long-run strategy for monetary policy
that does a better job of resisting imbalances and excesses than did past strategy, and which is not so
dependent for its success on large downward movements in short-term interest rates. The formulation
and communication of such a strategy would strengthen the recovery more reliably than either our
current form of forward guidance or another LSAP program, allowing us to move away from the zero
bound more quickly.
For purposes of this exercise, I considered the implications of a variety of policy rules, including
the 1993 version of the Taylor rule with a temporary downward adjustment to the equilibrium real
interest rate, the 1999 Taylor rule with inertia, and a targeting rule for nominal GDP.
Respondent 13: I expect that, in the second half of 2015, the economy will have recovered enough
that preserving the stability of long-term infation expectations and, in turn, future infation will warrant beginning to take steps to gradually reduce monetary stimulus. More specifcally, my view of the
appropriate path of policy refects my judgment that, with a 6 percent long-run rate of unemployment,
it will be necessary to begin raising the federal funds rate when the unemployment rate hits 7 percent
in order to keep future infation close to the long-run goal of 2 percent.
Respondent 14: My assessment of economic conditions accords closely with Tealbook. However, an
appropriate monetary policy, in my view, would entail a larger volume of asset purchases and a more
gradual increase in the federal funds rate after tightening commences than along the Tealbook path.
Similar to Tealbook, I would hold the fed funds rate at its current low level until the fourth quarter of
2015, although the unemployment rate, at the time I assume frst tightening is about 6.25%–somewhat
lower than in Tealbook. Finally, I have assumed that the longer-run normal level of the funds rate is
notably below its historical average, consistent with sta estimates that the expected nominal short
rate ten years ahead is now 3.07%–well below the sta’s assumed 4.25% equilibrium nominal rate.
Respondent 15: My expectations are close to those in the “weaker demand” scenario, which calls
for lifto in Q4 ’15 under both the outcome based rule and the inertial Taylor ’99 rule. In my forecast
unemployment will be 6.5% at Q4 ’15, which would also be consistent with lifto under the proposed
thresholds.
Respondent 16: Output and unemployment gaps are large and persistent, and infation remains
moderately below our 2 percent objective. This situation calls for very accommodative monetary
policy. Even with continuing LSAPs, appropriate policy calls for delaying lifto from the zero-lowerbound until the second half of 2015, when the unemployment rate falls below 6-1/2 percent. My
judgment on appropriate policy is informed by looking at simple rules that adjust for the zero-lowerbound and for the eects of unconventional policy; and it is informed by my assessment of risks to the
economy (which are large and skewed to the downside). In addition, it is informed by my assessment
of the costs and benefts of continuing unconventional actions.
Respondent 17: I believe that in order to achieve an infation rate of 2 percent we would want to
begin raising the federal funds rate in the frst half of 2014.
Respondent 18: Infation and infation expectations will be the main drivers of the removal of
accommodation. Economic growth will be slightly above trend in 2013 and beyond; unemployment
will decline slowly. The Committee will fnd it necessary to adjust policies to prevent infation from
rising above its target.

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Respondent 19: I am assuming the FOMC decides to adopt a thresholds approach, with values of
6.5% for unemployment and 2.5% for infation. My funds rate path is consistent with this assumption.
In particular, I have unemployment dropping below 6.5% in mid 2015, and hence the funds rate lifts
o before the end of 2015.

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Appropriate Monetary Policy – Balance Sheet
3(d)&(e). Does your view of the appropriate path of the Federal Reserve’s
balance sheet, other than the projected timing for implementing the
FOMC’s exit strategy, dier materially from that assumed by the sta in
the Tealbook? If yes, please specify in what ways (either qualitatively, or
if you prefer, quantitatively).

December survey
September survey

YES

NO

12
11

7
8

Respondent 1: Yes
As noted above, in part to reinforce the forward guidance on the target FFR, we assume that, after
the completion of the MEP at the end of the year, the FOMC institutes a fow-based, open-ended
purchase program of long-term Treasuries with an initial pace of purchases set at about $45 billion per
month. Consequently, the pace of total purchases of long-term securities would be about $85 billion
per month, similar to the purchase pace of these securities under the MEP and the MBS purchase
program. In addition, we assume that the FOMC statement and other communications will continue
to signal that purchases will continue at least until the FOMC observes substantial improvement in
the outlook for the labor market, provided that the medium-term infation outlook and longer-term
infation expectations remain consistent with the FOMC’s longer-run objective. Based on our outlook,
we currently expect that these purchases will last about one year and total about $1 trillion, which is a
longer duration program with a larger ultimate size than that assumed in the Tealbook. However, that
total can easily change depending upon the progress toward the FOMC objectives–it is the progress
toward objectives that is important in our assumed policy stance rather than a particular size of the
balance sheet. In our overall strategy for appropriate monetary policy, we believe that a collective
emphasis of an accommodative stance based on a portfolio of tools would enhance the eÿcacy of policy
in these circumstances.
Respondent 2: No
N/A
Respondent 3: Yes
I assume approximately $250 billion more in asset purchases than assumed in the Tealbook.
Respondent 4: No
N/A
Respondent 5: Yes
As noted above, we assume the open-ended LSAP program continues at an $85 billion per month pace
through the end of 2013, 2 quarters longer than the Tealbook assumption.
Respondent 6: Yes
I would not expand the balance sheet by as much as assumed by the sta in the Tealbook. Moreover,
I would begin reducing the balance sheet sooner and proceed at a faster pace.

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Respondent 7: Yes
Appropriate monetary policy entails additional LSAP at a pace of roughly $85 billion per month until
the end of 2013. At that point, the labor market recovery is well in train, with the unemployment
rate at 7.3 percent as a result of a sustained increase in the pace of hiring .
Respondent 8: Yes
I believe the MEP should be allowed to expire and we should cease purchases of MBS at this meeting.
Maintaining these balance sheet policies provide little, if any, additional support to labor markets
and they increase the risks of higher infation, higher infation expectations, and growing fnancial
imbalances. I believe the resulting stance of monetary policy would provide suÿcient accommodation
for achieving our long-run goals.
Respondent 9: No
N/A
Respondent 10: No
N/A
Respondent 11: Yes
My view of the total amount of LSAP purchases does not dier materially from the Tealbook. However,
I am concerned that the market expectation for purchases does dier from the path assumed in the
Tealbook and I am not certain that it will be possible to gradually change market expectations as is
assumed in the Tealbook. Rather than a path of purchases that continue at the rate of $85 billion per
month until mid 2013 when they stop altogether, I assume that purchases will be gradually reduced
but will continue for longer. The total of purchases will likely be in the $800 billion to $1 trillion range.
I also assume that the reduction will be accomplished primarily by reducing Treasury securities while
the purchase of mortgage backed securities continues at the same level until the end of 2013.
Respondent 12: Yes
No additions to SOMA Treasury security holdings to be made once the MEP is completed at the
close of 2012. However, MBS purchases to continue into 2013 at a pace of $40 billion per month, and
maturing Treasury securities to be rolled over at auction.
Respondent 13: No
My view of appropriate policy includes a balance sheet path that is modestly dierent from the
Tealbook’s, but not materially so. Under my view of appropriate policy, the pace of LSAPs in the
frst half of this year would be more gradual than assumed in the Tealbook.
Respondent 14: Yes
I assume that asset purchases continue at a level of around $85 billion per month through the end of
2013, the earliest time at which I would consider it appropriate, in the context of my forecast, to say
that there has been a signifcant improvement in the outlook for the labor market. In my forecast,
unemployment at the end of 2013 stands at 7.7%, a very slight decline from its present level. However,
my forecast for 2014 shows a very meaningful pickup in the pace of GDP growth to 3.7% and projects
a decline in unemployment of about 3/4 percentage points during 2014–i.e, a signifcant improvement
in the outlook for the labor market.

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Respondent 15: No
I assume that we will begin to reduce LSAP purchases by mid-2013, and stop them completely by
roughly the end of Q3. I do not expect a great deal of progress in reducing unemployment in 2013.
In my view, we are very near the point at which the risks of a larger balance sheet will outweigh the
likely benefts. I therefore support the end of LSAP purchases in mid-2013. Further increases to the
balance sheet should be reserved for cases in which we need to go “all in”, in particular the case of
another recession and with it the danger of defation.
I believe that further Treasury purchases are of little, if any, eÿcacy in reducing unemployment.
In contrast, I believe that MBS purchases are likely having an eect on mortgage rates and on the
real economy through housing prices, sales and construction. These eects, in turn, are likely aecting the sentiments and behavior of consumers as well as fnancial institutions and other businesses.
Nonetheless, I would also reduce and then cease MBS purchases beginning at mid-year because the
housing recovery will be well under way by then.
Respondent 16: Yes
Relative to Tealbook, I expect LSAPs to continue at least through September 2013 at a rate of $85b
per month.
Respondent 17: Yes
I believe that under an appropriate monetary policy we would allow the MEP to expire and would end
the MBS purchase program at this meeting. Once the MBS purchases in the pipeline have settled, the
combined eects of the size of our balance sheet, the low federal funds rate, and the low interest rate
on reserves will provide suÿcient stimulus for achieving the FOMC’s goals in a timely manner. In
addition, the proceeds of maturing MBS would be reinvested in US Treasuries rather than in agency
MBS as presently planned.
Respondent 18: Yes
My forecast does not incorporate any additional Treasury purchases.
I anticipate following the Committee’s exit strategy principles, but because my funds rate path is
steeper than in the Tealbook, I anticipate that we would reduce the size of the balance sheet more
quickly than in the Tealbook over the forecast horizon.
Respondent 19: No
N/A

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Forecast Narratives
4(a). Please describe the key factors shaping your central economic
outlook and the uncertainty around that outlook.
Respondent 1: Other Conditioning assumptions: We expect the lower degree of infation persistence evident since the early 1990s to continue. Infation expectations remain well anchored. We
project real foreign GDP growth (GDP weighted) at 1.7% in 2012, at 2.7% in 2013, and at 2.8%
in 2014. Our assumptions concerning the nominal dollar exchange rate are similar to those in the
Tealbook. Refecting intermeeting developments, our assumed path of WTI oil prices, based on recent
futures quotes, has moved down to $88.00 for 2012Q4 and $91.00 for 2013Q4, and $90.00 for 2014Q4.
We adopt the same federal fscal assumptions as in the Tealbook, which are unchanged from recent
meetings. Under these assumptions, there is a federal fscal drag of 1.2 percentage points of GDP in
2013, declining to 0.5 percentage points in 2014. We also adopt the Tealbook assumptions regarding
equity and home prices.
Outlook: The conceptual underpinnings of our forecast for growth and infation in 2013 and 2014
are little changed from those in September. As mentioned above, the fscal policy assumptions are
that fscal drag will increase substantially in 2013 as the payroll tax cut and extended unemployment
benefts are allowed to expire at the end of 2012. This depresses the growth rate of real PCE and
the personal saving rate over the frst half of the year. At the same time, however, the eects of the
drought on farm output will be subsiding and rebuilding after Hurricane Sandy will be ramping up.
Growth of real GDP over 2013H1 is likely to be around 2%, with average monthly gains of payroll
employment around 170,000.
By 2013H2, we expect growth to frm to around 2 3/4% (annual rate) as the headwinds, such as
household deleveraging and restricted access to credit, more fully subside. Also contributing to this
frming of growth is the turnaround in the housing market, leading to gains in residential investment
as well as to greater confdence that has a positive impact on consumer spending. Uncertainty about
the US fscal path is likely to diminish as the year progresses while world growth picks up as the
Euro area emerges from recession and emerging economy growth responds to fresh policy stimulus.
Finally, the substantial monetary accommodation begins to have a more substantial impact on the US
economy. For all of 2013, we expect growth of real GDP of around 2 1/2%, with the unemployment
rate ending the year around 7 1/2%.
By 2014 the fscal drag is expected to be greatly diminished, allowing the full force of monetary
accommodation and the natural healing of the economy to be realized. Growth in that year is likely
to be around 3 1/2%, with the unemployment rate declining by about one full percentage point to 6
1/2%. These trends continue into 2015, with projected growth at a similar rate as in 2014 and the
unemployment rate falling below 6%.
The increase of the total PCE defator in 2012 is now expected to be 1.6%, refecting larger declines
in energy prices than previously expected. The projected increase of the core PCE defator in 2012 is
also 1.6%. In 2013 and 2014, as the economy begins to establish greater forward momentum, we expect
both total and core infation to move gradually higher, with total PCE defator infation moving to
around 1.8% in 2013 and 2 1/4% in 2014. The gradual decline of slack in the economy along with the
expected decline of the exchange value of the dollar and resulting more rapid increase of nonpetroleum
import prices contribute to the expected increase in infation. With infation expectations anchored,
infation is at its objective in 2015.
Respondent 2: I think that my central outlook is not all that dierent from the Tealbook’s. The
economy has been hit by a mix of shocks. Some of these push down on both employment and infation
- we can think of these as “demand” shocks. These shocks present no dual mandate tensions: a
monetary policy that returns infation exactly to target in the face of these shocks will also return the
economy to full employment.

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But there have been other shocks that push up on infation while pushing down on employment we can think of these as “supply” shocks. Typically, when responding to these shocks using a balanced
approach to the dual mandate, appropriate monetary policy will give rise to above-target infation for
some period of time.
There are several key risks to this outlook. Others, I’m sure, will mention Europe, Asia, and the
US fscal situation. Let me mention a couple of others that don’t get as much attention.
1. We have been lucky - infation expectations have stayed well-anchored. A movement in infationary expectations in either direction, but especially downward, would be challenging for us to deal
with.
2. The long-run unemployment rate consistent with 2% infation may well move upwards in the
next year or two, especially if growth turns out to be slower than expected. We need to stay alert to
evidence of wage and compensation pressures, and be responsive to them.
Respondent 3: Despite some weaker than expected data on consumption, and the undoubtedly
related recent declines in consumer confdence, underlying conditions continue gradually to improve.
Housing in particular seems to have gained some traction, though persistent inventory overhang and
diÿculties in obtaining mortgages for purchasers with less than stellar credit ratings suggest the pace of
improvement will not likely accelerate too rapidly. Labor market conditions also continue to improve,
though again only gradually and with no apparent signs of signifcant acceleration.
The obvious elephant in the room is the set of legislative fscal changes that will be triggered in
the absence of congressional action. Although for modelling purposes, the Tealbook had to make
certain assumptions about the outcome, I don’t think there are very good grounds for believing that
a particular outcome is likely. There is some, hopefully modest, chance that we do drive over the cli,
with potentially substantial eects on growth depending on the duration of the free fall and its impact
on confdence. Yet there are also plausible outcomes that could simultaneously relieve businesses and
consumers, on the one hand, while making a credible start to longer-term fscal consolidation needs,
on the other. In such an instance, the steady progress in housing and the moderate progress in labor
markets might be boosted by a surge in investment and spending heretofore held back until the fscal
situation and thus overall growth prospects clarify.
Eurozone-generated risks of a major fnancial dislocation remain, though they have, in the latest
movement in their undulating pattern, receded somewhat recently.
Respondent 4: My central economic outlook is currently shaped by the fact that indicators do
not yet point to the existence of a virtuous cycle that could provide the momentum necessary to
move the recovery to a faster pace. Many indicators have improved; i.e., employment is improving,
and household wealth driven by improvements in shareholder value and home values are growing.
However, other indicators that need to move in tandem, such as improvements in business confdence
and capital expenditures and growth in real disposable income, are not robust.
Respondent 5: Even in the absence of the fscal cli, we would be projecting only moderate growth
in the current quarter. Adding in the cli’s depressing eect on confdence and spending and some
modest reduction in output from Hurricane Sandy, we are left with a growth forecast in the neighborhood of 1 percent in the current quarter.
Looking ahead, the key factors shaping the forecast are the same as they have been for some
time. Our baseline assumption is that resolution of the fscal cli will involve restraint on the order
of magnitude assumed in the Tealbook. We also assume the resolution will be clear enough to release
a modicum of spending that was put on hold during the second half of 2012. Furthermore, under
our baseline scenario, Europe will muddle through without a fnancial meltdown, and so over time
will exert a diminishing drag on confdence and spending. More fundamentally, with the support of
accommodative monetary policy, households and businesses will eventually make enough progress in

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shoring up their balance sheets to resume spending more briskly. Some of this will refect pent-up
demands for capital goods and consumer durables, which will provide an impetus for above-trend
growth as the associated stock-adjustment process takes place. Demand from abroad also is assumed
to frm in 2014 and 2015, as Europe emerges from recession and growth in Asia recovers to a more
robust pace.
Under our view of appropriate policy, suÿcient accommodation will be in place–and will be expected to remain in place–to result in infation drifting up some over the projected period. Importantly,
a credible commitment to our accommodative policy stance should support infation expectations and
push infation back up to a bit above our target by late in the projection period. Still, given we expect
resource gaps to remain substantial even into 2015, this projected increase in infation is quite modest,
with the PCE price index rising just 2.2 percent in 2015.
Respondent 6: I continue to think the convergence process is progressing. Nonetheless, the recent
growth and infation data have caused some slight changes in my outlook. I am assuming a reasonable
resolution of the fscal cli.
Respondent 7: Incoming data have been slightly softer than expected, but overall in line with
expectations. Some of the recent softness is likely related to the temporary eects of the hurricane
and the drought, which will reverse early next year. Labor market improvements remain unsatisfactory,
with declines in the unemployment rate being importantly infuenced by declines in the labor force
participation rather than by increases in the employment to population ratio. The sluggish pace of
growth in the second half of this year was infuenced importantly by the uncertainties surrounding
the domestic fscal outlook and the fnancial situation in Europe. The December drop in consumer
sentiment is just one indication of how uncertainty about fscal policy aects spending decisions. The
modal economic outlook is predicated on the resolution of the fscal impasse, and on the situation in
Europe not deteriorating dramatically. If this indeed occurs, uncertainty and pessimism about current
and expected conditions will decrease, leading to a higher pace of demand and hiring. As a result,
after modest gains in the frst months of next year, the pace of growth is expected to accelerate as
headwinds diminish and the eects of the stimulative monetary policy actions become more apparent.
Risks to the real economic outlook continue to be skewed to the downside. In the near term, as
uncertainty remains high and the eects of the fscal restraint become more pronounced, growth is
expected to stay modest. Therefore, any signifcant improvement in activity is, at this point, only
in the outlook. Given the challenges facing the economy in the near-term, monetary policy should
remain highly accommodative to ensure a more robust and self-sustaining recovery. For this reason,
the outlook is conditioned on additional LSAP at a pace of $85 billion per month until the end of
2013. This additional stimulus contributes to a more robust upturn starting in the second half of next
year, so that GDP growth in 2013 is expected to be close to 3 percent despite the important restraint
from fscal policy. By the end of next year, a faster and sustained pace of job creation leads to the
unemployment rate falling to 7.3 percent. The additional $1 trillion of quantitative easing over the
course of 2013 also helps stimulate growth beyond next year: The unemployment rate is expected to
near 6 percent, with infation running somewhat below target, at the end of the forecast horizon.
Respondent 8: While Hurricane Sandy has disrupted many lives and introduced some volatility to
high frequency data releases, on net it should have little impact on fourth quarter real GDP growth.
I continue to expect a moderate economic recovery over the next several years with a gradual
reduction in the unemployment rate refecting strengthening housing activity and consumer confdence.
In addition, the labor market continues to heal. Even with the eects of Hurricane Sandy, employment
rose an average of 158 thousand over the previous 5 months (July – November). Finally, an extremely
accommodative monetary policy contributes to growth.

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Uncertainty about how the fscal cli will be resolved, a slowdown in global growth, and expectations of higher taxes and more regulations will likely weigh on growth. On the upside, the increases
in housing activity and auto sales are consistent with a household sector that may be even more
supportive of growth going forward.
Turning to infation, I expect that maintaining our accommodative monetary policy (funds rate,
forward guidance, asset purchases) would lead to an increase in infation in 2014 and 2015. Therefore,
I think an end to asset purchases and an earlier lift-o in the funds rate is needed to maintain infation
close to our 2 percent objective.
Respondent 9: I expect the economy to remain on a subdued growth path over the medium-term
owing to a number of restraining infuences. The rebalancing of household balance sheets is likely to
play out several more years and continue to hold down consumer spending. Policy and other outlook
uncertainties will check the expansion of capital and retard employment growth. Fiscal austerity at all
levels will restrain government spending. Nevertheless, I think growth will be suÿcient to gradually
bring down unemployment. Unusually slow growth over the next several quarters will exert more
downward pressure on prices, holding infation a little under the longer-term target during the frst
half of 2013. Infation expectations, however, are expected to remain well anchored and this deviation
from target will likely be short-lived.
Respondent 10: Pattern of sluggish growth in production and income continues. Cyclical gaps
remain wide but there has likely been at least a temporary reduction in potential growth as well.
Labor market improving only slowly, leading in turn to slow gains in wage income and in household
spending. Unemployment has improved a bit in recent months, however, notwithstanding very slow
growth. Fiscal policy, both federal and state and local, are applying drag and are likely to continue
to do so in 2013. In the short run, federal fscal policy is having adverse eects on confdence and
spending, especially frm spending. The eects of the European situation on trade and fnance,
including indirect eects through other trading partners, are a headwind, although the situation has
moderately improved with ECB actions. The drought and hurricane Sandy subtracted from growth
recently but there will be payback in early 2013. Housing is clearly improving and is poised to help
the overall recovery. Higher house prices are adding to the pace of improvement in household wealth
and balance sheets. Housing, improved consumer sentiment, and resolution of fscal issues should lead
to somewhat stronger growth in 2013 than in 2012.
Core infation remains very well anchored by stable expectations and modest downside pressure
from labor market slack and slow wage growth. Pressure on commodity prices has been limited,
refecting both supply (e.g., in the case of oil, increased US production, good Middle East supply)
and demand (weaker global growth, increased eÿciency in the US). Stable commodity prices implies
stable overall infation.
Respondent 11: My forecast is consistent with the factors outlined in the “Robust Housing Recovery” alternative scenario. I believe that housing will continue to strengthen. I give less weight
to the potential drag from shadow inventory coming on to the market, more weight to the potential
for stronger household formation and I have assumed more support from MBS purchases than in the
Tealbook baseline. I also assume that consumer confdence will be bolstered by rising house prices
but not to the extent described in the “Housing Reverberations” alternative scenario.
Respondent 12: Drags on growth from excess household debt continue to ease, and residential
investment is now making consistently positive growth contributions. However, extreme tax and regulatory uncertainty limits the pace of the expansion and retards the impact of a highly accommodative
monetary policy. Down-side risks stemming from economic and fnancial problems abroad have eased,

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somewhat, but remain substantial, as does the uncertainty stemming from it that impacts U.S. business decision making and budgeting. Pending resolution of these uncertainties, U.S., businesses are
avoiding new spending commitments and holding above-normal levels of cash. If the uncertainties
remain unresolved, I would expect to lower my growth projections and raise my unemployment estimates, perhaps signifcantly. Conversely, an unexpectedly rapid and favorable resolution would
produce faster GDP growth than I am currently projecting. Recovery and rebuilding after hurricane
Sandy will give a noticeable boost to 2013:H1 GDP growth. On the other hand, threatened steep cuts
in government purchases, if implemented, would subtract signifcantly from growth.
Respondent 13: I expect the economy to recover at a moderate rate from 2013 through 2015,
refecting a range of forces. The positive forces include considerable monetary stimulus, improvement
in the housing sector that will gradually spill over to consumer spending, and the economy’s usual
self-correcting forces. The negative forces include fscal restraint and uncertainty about fscal policy
and conditions in Europe.
In this environment, I expect infation to remain near 2 percent from 2013 through 2015. This
projection refects recent PCE price trends, stable infation expectations, and slow growth in wages.
With the job market still weak, there is unlikely to be much upward pressure on infation coming from
wages over the next couple of years. The stability of infation and infation expectations around 2
percent indicate there is unlikely to be much downward pressure on infation.
As to uncertainty and risks, the fscal cli and the recession in Europe make the outlook for
GDP growth and unemployment more uncertain than normal. Both the fscal cli and Europe’s
problems pose downside risks to the pace of recovery in the U.S. For infation, I believe the uncertainty
surrounding the forecast to be consistent with historical norms and the risks to be balanced. As I
noted above, if downside risks to the pace of the recovery were to materialize, infation could slow.
Alternatively, the continued expansion of our balance could eventually cause infation expectations
and, in turn, infation to rise.
Respondent 14: A number of special factors, including Hurricane Sandy, the summer drought,
and the distortion in seasonal factors due to the recession, make it diÿcult to discern the underlying
momentum in aggregate demand and trends in the labor market. That said, incoming data suggest
that the economy, on balance, has been expanding, and is likely to continue to expand over the next
year, at a trendlike pace. The growth rate of payroll employment has improved somewhat, and the
unemployment rate has edged down, but I do not see suÿcient momentum in demand to forecast
any meaningful further improvement in labor market conditions during the coming year. Consumer
spending growth and growth in disposable income have surprised to the downside, and there has been
a notable deterioration in consumer confdence as households appear to be realizing that taxes are
poised to rise. Rising house prices should serve as a support to consumer spending going forward, but
recovery in the housing market and residential investment is likely to be quite gradual. Even with a
successful resolution of the fscal cli, fscal policy is poised to serve as a signifcant drag on spending
over the coming year due to the end of the payroll tax cut and extended unemployment benefts. Slow
growth in the global economy, and continued contraction in the euro area is a further important drag
on growth. With respect to infation, core infation appears to be running under the Committee’s 2
percent objective and with well-anchored infation expectations and very modest increases in wages
and labor compensation, my expectation is that infation will run below 2 percent over the next several
years even with a highly accommodative monetary policy.
Respondent 15: I expect that the economy will eventually produce a run of “above trend” growth
to move us closer to full utilization of resources. I no longer expect that this run will begin in H1 2013.
I see another 2% year, give or take, despite the help we get in Q1 from the drought and hurricane
rebounds. I also see more down side than upside risk.

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It seems very likely that the fscal negotiations will drag on and be quite contentious. In particular,
I fear that we may have another debt ceiling crisis in late February, and with it another negative
confdence shock. If so, growth could be even lower than the “weak demand” case. Even if there is
no crisis moment, the year will probably be dominated by these messy and contentious negotiations,
which could undermine consumer and business activity.
If the fscal negotiations conclude quickly and successfully, there could be a positive shock to
confdence. I now view that as unlikely.
I see a substantial output gap and no persuasive evidence of damage to potential output.
I see infation running below mandate with risk to go lower if the economy weakens.
Respondent 16: The economy is still recovering from the severe housing collapse and fnancial
crisis. Recoveries from these types of episodes are associated with sustained weakness in aggregate
demand through a variety of channels, which policy has only partially oset. Some headwinds are
slowly easing. For example, banking and credit conditions are improving; and housing is likely to
continue its gradual improvement. At the same time, however, other headwinds remain intense. For
example, fscal policy is turning increasingly contractionary – the ongoing negotiations regarding the
Federal fscal cli are mainly about how contractionary it will actually be. The global economy
remains a drag on activity. Uncertainty about economic prospects continues to weigh on consumer
and, especially, business spending.
In this environment, I expect the economic recovery will proceed at a moderate pace, which will
allow us to continue making modest progress on closing output and unemployment gaps over the next
few years. Even with substantial monetary stimulus, it will take many years of above-trend growth
to return the economy to full employment.
In terms of infation, signifcant slack in labor and goods markets and subdued commodity and
import prices should keep infation somewhat below the FOMC’s 2 percent infation target for the
next few years.
Respondent 17: GDP growth has been disappointing. Fiscal drag will restrain growth in the frst
half of 2013. Later, there will be additional frming in the labor market that will be refected in
gradually improving personal income growth and consumer spending. Uncertainty over the federal
budget and regulatory actions will dampen business investment. Residential investment is likely to
continue to contribute to growth in overall activity. The upward trajectory in home prices should
bolster consumer sentiment; however, weak income growth will dampen consumer spending in the
near term. Government consumption and investment will be held down by large, persistent federal
defcits. Demand for US exports is likely to increase.
Respondent 18: Uncertainty about U.S. fscal policy has been a signifcant drag on growth. Once
this uncertainty fades I expect that business spending will pick up. Although household deleveraging
continues, I expect it to become less of a drag going forward as household balance sheets improve.
I expect 3 percent growth over the medium term, slightly above my longer-term trend. With a
moderate pace of growth over the forecast horizon, the labor market recovery remains gradual — I
expect the unemployment rate to move down to about 6 percent by the end of 2015, at which time
it reaches my estimate of the natural rate of unemployment. I anticipate that headline infation will
be 1.8 percent in 2012 and then edge up to 2 percent over the remainder of the forecast horizon.
Infation stays anchored around my target of 2 percent in response to tighter monetary policy than
that anticipated in the Tealbook.
In my view, the substantial liquidity that is now in the fnancial system continues to imply a risk
that infation will rapidly accelerate to unacceptable levels and that infation expectations may become
unanchored. To ward o these developments, the FOMC will need to commence a steady tightening

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of monetary policy by ending purchases by mid-2013 and then beginning to raise rates in the second
half of 2013.
Respondent 19: I anticipate a marked acceleration in growth beginning in the second half of 2013,
and continuing into 2014, under the assumption that the fscal cli is at least partially resolved,
and that the situation in Europe continues to stabilize. In this scenario, the gains that we have seen
recently in consumer confdence, in the housing, retail and auto sectors, all begin to provide a stronger
impetus to growth, and I expect the business sector to begin to fall into step, increasing hiring and
capital expenditures. At the same time, I expect the frst half of 2013 to be slow, so that growth for
the calendar year overall is only modest, as is progress on unemployment.

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Forecast Narratives (continued)
4(b). Please describe the key factors causing your forecast to change since
the previous SEP.
Respondent 1: The revisions to Q3 GDP data indicate that the starting conditions for 2012Q4
were weaker than we previously expected, and we have reduced our projection for the quarter to
between 1/2% and 1% (annual rate). If realized, that would bring the growth rate of real GDP for the
second half of the year to 1.6% (annual rate), the same as over the frst half of the year but below our
previous projections. This has little eect on projections for subsequent quarters.
Overall, the data on consumer spending has been a little weaker than we had expected in September, hence we have lowered our near-term projection for real PCE. However, unlike the Tealbook, it
has less eect on subsequent quarters. In contrast, the recovery of the housing sector appears to have
gained momentum, and we have raised our residential investment forecast somewhat.
Indicators of real business fxed investment have been softer than expected, leading us to lower
our near-term investment forecast to be fat for 2012H2. We also see investment growth in the frst
half of 2013 to be slower than previously anticipated.
The decline in the unemployment rate in the second half of the year was a surprise to us, and
we have lowered our near-term unemployment rate projections. However, the behavior of other labor
market data over recent months indicate that the labor market and the overall economy is still rather
sluggish. The growth of hours worked and average hourly earnings remained soft, and the level of
hours is still well below its pre-recession level. The labor force participation rate and the employmentpopulation ratio have not changed substantially over the year and remain at low levels. Consequently,
we have made little change to our medium-term unemployment forecasts.
The infation data so far in the second half of 2012 has been somewhat lower than we projected
in September. In response, we have reduced modestly our projections for the second half of the year.
However, because some of the reduction refects temporary factors (including weakness in nonmarket
components of the PCE defator), we have not changed our medium-term infation projections.
A fnal note: many of the high frequency indicators released recently have been subject to negative
impacts from Hurricane Sandy. As such we have discounted some of the recent weaker data.
Respondent 2: My assessment of infationary pressures is now more closely aligned with, although
still higher than the Tealbook’s. My estimate of long-run growth is slightly lower, as is my estimate
of the long-run unemployment rate.
These relatively small adjustments have resulted in a large change in what I judge to be the
appropriate length of time before the frst increase of the fed funds rate. To me, this is another strong
argument why calendar-based guidance should be abandoned in favor of guidance based on economic
conditions.
Respondent 3: Not much change. A little downgrade based on incoming data and growing likelihood since September that the fscal issues will continue well into next year.
Respondent 4: Since the September SEP, my forecasts have become more conservative for several
reasons. First, I think that structural impediments in the economy (such as credit constraints) will
attenuate the speed in which fnancial market variables transfer to eects in the real economy. However,
at some point in time, the credibility of the FOMC to communicate eectively its intent to provide
growth-enhancing support could improve, to the ultimate beneft of possibly assisting in the ability to
see more positive eects on the real economy. Should this improvement in communication occur prior
to the occurrence of some of the costs associated with unconventionally accommodative monetary

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policy – like problems of price stability, fnancial stability and market functioning – then I would
expect the forecast to improve.
In addition, the ability of monetary policy to support fnancial markets will likely be attenuated
next year as markets gradually realize that cumulative purchases might be about $500 billion less than
they currently appear to have factored in. Over time, this realization could lead to a small amount of
upward pressure on long-term interest rates and dollar appreciation, and a small amount of downward
pressure on stock market prices.
My forecasts have also become more conservative because downside risks to the outlook– particularly from issues relating to fscal policy and emanating from Europe – have remained elevated.
Continued uncertainty about these scenarios could be restraining household spending and business
investment.
Respondent 5: Our outlook for growth in 2012 is 0.3 percentage point less than in the September
SEP. A bit of this refects the weather (a larger eect of the drought and disruptions from Hurricane
Sandy). But most of the revision is due to a more fundamental softness in household and business
spending, some of which is assumed to spill into next year. Furthermore, we have revised down our
estimates of potential output growth somewhat. Together, these result our forecast showing a bit less
growth in 2013 and 2014 than in our September submission.
We were surprised by the decline in the unemployment rate in 2012:H2, and have marked our
projection for the rate in 2012:Q4 down 0.4 percentage point relative to the September SEP. However,
after factoring in the GDP forecast revisions noted above, our projection for the unemployment rate
in 2015:Q4 is the same as in September.
The incoming price data have been running below our previous projection, and we have revised
down our projection for 2012 infation by 0.2 percentage point. Given the persistence in the infationary
process, we have nudged down our forecast by a tenth or two over the projection period.
Respondent 6: Slower real GDP growth recently than I anticipated has caused some adjustments
in the timing of growth - some reductions in my growth forecasts for 2012 and 2013 and an increase
in growth in 2014. Lower infation data recently than I anticipated has caused some reductions in my
infation forecasts for 2012.
Respondent 7: Incoming data have been, by and large, consistent with my expectations at the
time of the previous SEP. As a result, my views about appropriate monetary policy has not changed
signifcantly.
Respondent 8: My forecasts for real GDP and infation are relatively unchanged. However, my unemployment rate forecast has been revised down by 0.4 percentage point refecting recent (September
- November) unemployment rate reports.
Respondent 9: Incoming data suggest slightly less growth for 2012:H2 than I had assumed in
September. Resolutions that allow us to avoid the full impact of the fscal cli will nevertheless
introduce some spending drag early in 2013. I expect this modestly lower growth trajectory to put a
little additional downward pressure on wage and price growth in the frst half of 2013.
Respondent 10: Not much overall change. Slightly better data in labor market, housing. Reduced
tensions over Europe. However, businesses remain very cautious and fscal tensions are particularly
high in the near term.
Respondent 11: Continued evidence of strength and momentum in house prices.

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Respondent 12: Hurricane Sandy has caused me to revise 2012 GDP growth slightly downward,
while recent favorable data have caused me to lower the projected path of the unemployment rate.
Infation has been coming in a bit lower than I had anticipated. As GDP growth picks up, in 2013,
infation should return to target levels.
Respondent 13: The data received since the September SEP have been largely consistent with
the moderate pace of recovery and near-target infation rate I projected at the time. However, in
light of recent developments regarding the fscal cli, I have boosted the amount of fscal restraint
assumed in the forecast. In particular, I have adjusted the forecast to fully incorporate the end of the
payroll tax holiday and extended unemployment compensation. By themselves, these changes have
modestly lowered my growth forecast and edged up my unemployment forecast. However, my forecast
for the unemployment rate is now a little lower than it was in September because the eects of the
surprising fall in unemployment in August and September have outweighed the eects of additional
fscal restraint.
Respondent 14: My forecast has not changed materially since the previous SEP.
Respondent 15: I have signifcantly reduced my growth projection for 2013. I think 2013 looks
like another 2% year, in light of current momentum, the pending fscal negotiations, recession and
possible turmoil in Europe, and slow growth in some major emerging economies.
Respondent 16: Since September, the data have been mixed but, on balance, consistent with my
forecast. Both unemployment and infation have come in lower than I expected, and Hurricane Sandy
has aected near-term activity. Beyond the next few quarters, I see a bit faster momentum in the
economy and somewhat faster progress on reducing unemployment. Housing indicators have come in
above my expectations, and the tail risk associated with Europe has receded. Oil prices are lower,
which will help support consumer spending.
In addition to a faster momentum, my unemployment path falls faster because I have lowered
my estimate of potential growth for the next few years. Hence, the economy closes output and
unemployment gaps more quickly.
My infation forecast is a bit lower, refecting recent data as well as the lower path for oil prices.
Respondent 17: The growth of wage and salary income was revised down signifcantly. Business
investment has been weaker than I anticipated. The likelihood of achieving meaningful progress on
establishing a sustainable federal budget trajectory has diminished. My long run growth estimate is
lower, due to lower expected growth in composition-adjusted labor hours.
Respondent 18: My economic forecast is little changed. But given the current stance of policy,
I’ve pushed out the date of lifto from 2012 to 2013 and steepened the policy path..
Respondent 19: Overall, my forecast for GDP growth is very close to that in the previous SEP.
My forecast for the unemployment rate is essentially shifted down by 0.30, in light of the drop we
have had since September, but the trajectory going forward remains very similar.

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SEP: Compilation and Summary of Individual Economic Projections

December 11–12, 2012

Forecast Narratives (continued)
4(c). Please describe any important dierences between your current
economic forecast and the Tealbook.
Respondent 1: As stated in our response to question 3, we assume (based on our modal economic
forecast) that the asset purchase program (MBS plus long-term Treasuries) lasts through the end of
2013 rather than through mid-2013 as the Tealbook assumes. Because of the greater size and duration
in the balance sheet over the forecast horizon, we thus assume that term premia rise to normal levels
more slowly than in the Tealbook.
We see some of the headwinds restraining economic growth subsiding somewhat more quickly in
2014 than in the Tealbook. Thus we expect the output gap to begin to close more quickly that year,
and our 2014 real GDP growth forecast is modestly above that of the Tealbook.
For 2013 and 2014, the Tealbook expects somewhat stronger real PCE growth (even though the
Tealbook has marked down its PCE forecast) and notably weaker business fxed investment growth
than our forecast. In part, the dierences in PCE growth forecasts refect somewhat dierent views
of the eects of the expected fscal consolidation on household behavior. As far as investment, it
appears that in the Tealbook the restraints that have held down fxed investment recently will fade
more slowly than in our projections.
On balance in 2014, our projection of stronger investment growth more than osets the weaker
projected PCE growth, which implies that we forecast stronger fnal domestic demand growth than
does the Tealbook. Consequently, we project higher import growth for that year. With foreign GDP
growth and exchange rate projections similar in the two forecasts, this means that net exports are a
drag for GDP growth in our forecast for that year instead of being a neutral factor as in the Tealbook
forecast.
We expect a greater decline in the unemployment rate in 2014 than is projected in the Tealbook,
even accounting for the dierences in the GDP forecasts and having similar projections for the labor
force participation rate. The source of this dierence appears to be a dierent interpretation of labor
market dynamics as expansions mature; that is, we do not place as much weight on Okun’s Law as
the Board sta does.
We see a stronger infuence of anchored infation expectations on infation dynamics than does the
Tealbook. Consequently, our infation forecast and the Tealbook forecast are similar for 2012, but
beyond that we see total and core infation remaining near 2% whereas the Tealbook has infation
declining in 2013 and remaining near the 2013 level in 2014. This dierence may also partially refect
the diering monetary policy assumptions in the two forecasts.
Both the Tealbook and our outlook see a downside balance of risks to real growth. For infation,
we agree that the risks are broadly balanced, but we see uncertainty as still higher than normal
whereas the Tealbook sees uncertainty at a near normal level. This assessment refects our view that
the unusual nature of the current expansion leaves uncertainty about both real activity and infation
above normal levels.
Respondent 2: I see unemployment falling more rapidly, and infation being higher, than does the
Tealbook. In large part, this is because my path of appropriate policy is dierent from the policy path
that underlies the Tealbook forecast.
Respondent 3: No major analytical dierences.
Respondent 4: None.

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SEP: Compilation and Summary of Individual Economic Projections

December 11–12, 2012

Respondent 5: Our projection for growth is stronger than in the Tealbook. The dierences largely
refect our assumption that the open-ended LSAP continues until the end of 2013 and our somewhat
stronger growth rate of potential output.
Our forecast for infation is 1/2 to 3/4 percentage point higher than in the Tealbook. This is due
to the more robust growth in demand in our forecast as well as to our assumption that a credible
commitment to accommodative policy will help buoy infation expectations and thus elevate actual
infation.
Respondent 6: I anticipate faster real GDP growth for 2013 and slower real GDP growth for 2015
than the Tealbook. For 2013 through 2015, I anticipate a lower unemployment rate than the Tealbook.
Respondent 7: My forecast is conditioned on more policy stimulus than in the Tealbook, and this
results in a faster pace of growth in my forecast than in the Tealbook. When conditioned on the same
policy assumptions, fading headwinds are expected to lead to a slightly faster pace of growth than
projected in the Tealbook starting in the second half of next year.
Respondent 8: In comparison to the Tealbook forecast, I see greater infationary pressures in
the next few years from a continuation of the currently highly accommodative stance of policy. In
response to these pressures that threaten the stability of long-term infation expectations, my view of
appropriate policy calls for a lift-o of the federal funds rate in late 2013, two years earlier than in
Tealbook. In addition, my forecast assumes that the MEP program and MBS purchases end.
Respondent 9: While my forecast is broadly in line with the current Tealbook baseline, I expect
a bit more progress in reducing unemployment over the next two years. I also project infation to
follow a path closer to our longer-term infation objective owing to a strong adherence of wage and
price growth to longer-term infation expectations.
Respondent 10: A bit more optimistic about growth in 2013, assuming reasonable resolution to
fscal issues and no unexpected shocks. I remain a bit more pessimistic than the Tealbook about
the extent to which activity will accelerate in the out years, in light of the slow pace of recovery
experienced thus far and the likelihood of continued headwinds from Europe and US fscal policy.
Respondent 11: N/A
Respondent 12: I see somewhat faster GDP growth in 2013 than does the Tealbook, with a correspondingly larger reduction in the unemployment rate. My infation forecasts converge to 2 percent
more rapidly than the Tealbook’s. These dierences imply that there is less need for monetary-policy
accommodation.
Respondent 13: My current forecast is quite similar to the Tealbook’s. The biggest dierence,
which isn’t material, is in the headline infation forecast. Compared to the Tealbook, I expect less
downward pressure from food and energy prices.
Respondent 14: N/A
Respondent 15: I expect lower growth in 2013. My expectations are close to the “weaker demand”
forecast.

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SEP: Compilation and Summary of Individual Economic Projections

December 11–12, 2012

Respondent 16: My forecast is broadly similar to the Tealbook projection on a policy-consistent
basis. My forecast for GDP is a touch stronger, in part because I have more monetary stimulus.
Respondent 17: Growth is lower next year due in part to greater fscal drag, Also, uncertainty
over the federal budget and regulatory actions will restrain private spending even after the fscal cli
negotiations are completed. Infation is higher next year due to well-anchored expectations.
Respondent 18: My forecast calls for a stronger economy in 2013 and tighter monetary policy than
the Tealbook. I anticipate a lower unemployment rate than the Tealbook in 2013 and 2014.
Respondent 19: I am a touch more optimistic for growth in 2013, for the reasons described above,
but other than that, am quite close to the Tealbook.

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SEP: Compilation and Summary of Individual Economic Projections

December 11–12, 2012

Figure 3.A. Distribution of participants’ projections for the change in real GDP, 2012–15 and over the longer run
Number of participants

2012

December projections
September projections

December and September
Tealbook

1.6 1.7

1.8 1.9

2.0 2.1

2.2 2.3

2.4 2.5

2.6 2.7

2.8 2.9

3.0 3.1

3.2 3.3

3.4 3.5

3.6 3.7

3.8 3.9

4.0 4.1

20
18
16
14
12
10
8
6
4
2

4.2 4.3

Percent range
Number of participants

1.6 1.7

20
18
16
14
12
10
8
6
4
2

December and September
Tealbook

2013

1.8 1.9

2.0 2.1

2.2 2.3

2.4 2.5

2.6 2.7

2.8 2.9

3.0 3.1

3.2 3.3

3.4 3.5

3.6 3.7

3.8 3.9

4.0 4.1

4.2 4.3

Percent range
Number of participants

1.6 1.7

20
18
16
14
12
10
8
6
4
2

December and September
Tealbook

2014

1.8 1.9

2.0 2.1

2.2 2.3

2.4 2.5

2.6 2.7

2.8 2.9

3.0 3.1

3.2 3.3

3.4 3.5

3.6 3.7

3.8 3.9

4.0 4.1

4.2 4.3

Percent range
Number of participants

1.6 1.7

20
18
16
14
12
10
8
6
4
2

December and September
Tealbook

2015

1.8 1.9

2.0 2.1

2.2 2.3

2.4 2.5

2.6 2.7

2.8 2.9

3.0 3.1

3.2 3.3

3.4 3.5

3.6 3.7

3.8 3.9

4.0 4.1

4.2 4.3

Percent range
Number of participants

20
18
16
14
12
10
8
6
4
2

Longer run

1.6 1.7

1.8 1.9

2.0 2.1

2.2 2.3

2.4 2.5

2.6 2.7

2.8 2.9

3.0 3.1

3.2 3.3

3.4 3.5

3.6 3.7

Percent range

Note: Definitions of variables are in the general note to table 1.

Authorized for Public Release – Page 41 of 47

3.8 3.9

4.0 4.1

4.2 4.3

SEP: Compilation and Summary of Individual Economic Projections

December 11–12, 2012

Figure 3.B. Distribution of participants’ projections for the unemployment rate, 2012–15 and over the longer run
Number of participants

2012

December
Tealbook
September
Tealbook

December projections
September projections

5.0 5.1

5.2 5.3

5.4 5.5

5.6 5.7

5.8 5.9

6.0 6.1

6.2 6.3

6.4 6.5

6.6 6.7

6.8 6.9

7.0 7.1

7.2 7.3

7.4 7.5

7.6 7.7

7.8 7.9

8.0 8.1

20
18
16
14
12
10
8
6
4
2

8.2 8.3

Percent range
Number of participants

2013

5.0 5.1

20
18
16
14
12
10
8
6
4
2

December
Tealbook
September
Tealbook

5.2 5.3

5.4 5.5

5.6 5.7

5.8 5.9

6.0 6.1

6.2 6.3

6.4 6.5

6.6 6.7

6.8 6.9

7.0 7.1

7.2 7.3

7.4 7.5

7.6 7.7

7.8 7.9

8.0 8.1

8.2 8.3

Percent range
Number of participants

2014

5.0 5.1

20
18
16
14
12
10
8
6
4
2

December
Tealbook
September
Tealbook

5.2 5.3

5.4 5.5

5.6 5.7

5.8 5.9

6.0 6.1

6.2 6.3

6.4 6.5

6.6 6.7

6.8 6.9

7.0 7.1

7.2 7.3

7.4 7.5

7.6 7.7

7.8 7.9

8.0 8.1

8.2 8.3

Percent range
Number of participants

2015

5.0 5.1

20
18
16
14
12
10
8
6
4
2

December
Tealbook
September
Tealbook

5.2 5.3

5.4 5.5

5.6 5.7

5.8 5.9

6.0 6.1

6.2 6.3

6.4 6.5

6.6 6.7

6.8 6.9

7.0 7.1

7.2 7.3

7.4 7.5

7.6 7.7

7.8 7.9

8.0 8.1

8.2 8.3

Percent range
Number of participants

20
18
16
14
12
10
8
6
4
2

Longer run

5.0 5.1

5.2 5.3

5.4 5.5

5.6 5.7

5.8 5.9

6.0 6.1

6.2 6.3

6.4 6.5

6.6 6.7

6.8 6.9

7.0 7.1

7.2 7.3

7.4 7.5

Percent range

Note: Definitions of variables are in the general note to table 1.

Authorized for Public Release – Page 42 of 47

7.6 7.7

7.8 7.9

8.0 8.1

8.2 8.3

SEP: Compilation and Summary of Individual Economic Projections

December 11–12, 2012

Figure 3.C. Distribution of participants’ projections for PCE inflation, 2012–15 and over the longer run
Number of participants

2012

December
December projections Tealbook
September projections

1.3 1.4

1.5 1.6

20
18
16
14
12
10
8
6
4
2

September
Tealbook

1.7 1.8

1.9 2.0

2.1 2.2

2.3 2.4

Percent range
Number of participants

20
18
16
14
12
10
8
6
4
2

2013

December and September
Tealbook

1.3 1.4

1.5 1.6

1.7 1.8

1.9 2.0

2.1 2.2

2.3 2.4

Percent range
Number of participants

20
18
16
14
12
10
8
6
4
2

2014

December and September
Tealbook

1.3 1.4

1.5 1.6

1.7 1.8

1.9 2.0

2.1 2.2

2.3 2.4

Percent range
Number of participants

20
18
16
14
12
10
8
6
4
2

December and September
Tealbook

2015

1.3 1.4

1.5 1.6

1.7 1.8

1.9 2.0

2.1 2.2

2.3 2.4

Percent range
Number of participants

20
18
16
14
12
10
8
6
4
2

Longer run

1.3 1.4

1.5 1.6

1.7 1.8

1.9 2.0

2.1 2.2

Percent range

Note: Definitions of variables are in the general note to table 1.

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2.3 2.4

SEP: Compilation and Summary of Individual Economic Projections

December 11–12, 2012

Figure 3.D. Distribution of participants’ projections for core PCE inflation, 2012–15
Number of participants

2012

December
Tealbook

September
Tealbook

1.5 1.6

1.7 1.8

December projections
September projections

1.9 2.0

2.1 2.2

20
18
16
14
12
10
8
6
4
2

2.3 2.4

Percent range
Number of participants

2013

20
18
16
14
12
10
8
6
4
2

December and September
Tealbook

1.5 1.6

1.7 1.8

1.9 2.0

2.1 2.2

2.3 2.4

Percent range
Number of participants

2014

20
18
16
14
12
10
8
6
4
2

December and September
Tealbook

1.5 1.6

1.7 1.8

1.9 2.0

2.1 2.2

2.3 2.4

Percent range
Number of participants

2015

December and September
Tealbook

1.5 1.6

1.7 1.8

20
18
16
14
12
10
8
6
4
2
1.9 2.0

2.1 2.2

Percent range

Note: Definitions of variables are in the general note to table 1.

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2.3 2.4

SEP: Compilation and Summary of Individual Economic Projections

December 11–12, 2012

Figure 3.E. Distribution of participants’ projections for the target federal funds rate, 2012–15 and over the longer run
Number of participants

2012

December and September
Tealbook

0.00 0.37

0.38 0.62

0.63 0.87

0.88 1.12

December projections
September projections

1.13 1.37

1.38 1.62

1.63 1.87

1.88 2.12

2.13 2.37

2.38 2.62

2.63 2.87

2.88 3.12

3.13 3.37

3.38 3.62

3.63 3.87

3.88 4.12

4.13 4.37

20
18
16
14
12
10
8
6
4
2

4.38 4.62

Percent range
Number of participants

2013

December and September
Tealbook

0.00 0.37

0.38 0.62

0.63 0.87

0.88 1.12

20
18
16
14
12
10
8
6
4
2

1.13 1.37

1.38 1.62

1.63 1.87

1.88 2.12

2.13 2.37

2.38 2.62

2.63 2.87

2.88 3.12

3.13 3.37

3.38 3.62

3.63 3.87

3.88 4.12

4.13 4.37

4.38 4.62

Percent range
Number of participants

September
Tealbook

2014

December
Tealbook

0.00 0.37

0.38 0.62

0.63 0.87

0.88 1.12

20
18
16
14
12
10
8
6
4
2

1.13 1.37

1.38 1.62

1.63 1.87

1.88 2.12

2.13 2.37

2.38 2.62

2.63 2.87

2.88 3.12

3.13 3.37

3.38 3.62

3.63 3.87

3.88 4.12

4.13 4.37

4.38 4.62

Percent range
Number of participants

September
Tealbook

2015 December
Tealbook

0.00 0.37

0.38 0.62

0.63 0.87

0.88 1.12

1.13 1.37

1.38 1.62

1.63 1.87

1.88 2.12

2.13 2.37

20
18
16
14
12
10
8
6
4
2

2.38 2.62

2.63 2.87

2.88 3.12

3.13 3.37

3.38 3.62

3.63 3.87

3.88 4.12

4.13 4.37

4.38 4.62

Percent range
Number of participants

Longer run
20
18
16
14
12
10
8
6
4
2

0.00 0.37

0.38 0.62

0.63 0.87

0.88 1.12

1.13 1.37

1.38 1.62

1.63 1.87

1.88 2.12

2.13 2.37

2.38 2.62

2.63 2.87

2.88 3.12

3.13 3.37

3.38 3.62

3.63 3.87

3.88 4.12

4.13 4.37

4.38 4.62

Percent range
Note: The target federal funds rate is measured as the level of the target rate at the end of the calendar year or
in the longer run.

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SEP: Compilation and Summary of Individual Economic Projections

December 11–12, 2012

Figure 4. Uncertainty and risks in economic projections

Number of participants

Uncertainty about GDP growth

20
18
16
14
12
10
8
6
4
2

December projections
September projections

Lower

Broadly
similar

Higher

Number of participants

Risks to GDP growth

Weighted to
downside

Broadly
balanced

Number of participants

Uncertainty about the unemployment rate

Lower

Broadly
similar

20
18
16
14
12
10
8
6
4
2

Higher

Risks to the unemployment rate

Weighted to
downside

Lower

Broadly
similar

20
18
16
14
12
10
8
6
4
2

Higher

Broadly
balanced

Lower

Broadly
similar

Higher

Weighted to
upside

Risks to PCE inflation

Weighted to
downside

20
18
16
14
12
10
8
6
4
2

20
18
16
14
12
10
8
6
4
2

Number of participants

Broadly
balanced

Number of participants

Uncertainty about core PCE inflation

Weighted to
upside
Number of participants

Number of participants

Uncertainty about PCE inflation

20
18
16
14
12
10
8
6
4
2

December projections
September projections

20
18
16
14
12
10
8
6
4
2

Weighted to
upside
Number of participants

Risks to core PCE inflation

Weighted to
downside

Broadly
balanced

Note: Definitions of variables are in the general note to table 1.

Authorized for Public Release – Page 46 of 47

20
18
16
14
12
10
8
6
4
2

Weighted to
upside

SEP: Compilation and Summary of Individual Economic Projections

December 11–12, 2012

Figure 5. Scatterplots of projections in the initial year of policy firming (in percent)
Unemployment
rate

PCE
inflation
2.5

8.0

7.5

2.0

7.0

6.5

6.0

1.5

5.5

5.0

2.0

2.5

3.0
3.5
4.0
Change in real GDP

4.5

5.0

1.0

2.0

2.5

3.0
3.5
4.0
Change in real GDP

4.5

5.0

PCE
inflation
2.5

2.0

Year of Firming
2013
2014
2015

1.5

2016

1.0

5.0

5.5

6.0
6.5
7.0
Unemployment rate

7.5

8.0

Note: When the projections of two or more participants are identical, larger markers, which represent one participant each, are used so that each projection can be seen.

Authorized for Public Release – Page 47 of 47