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Authorized for public release by the FOMC Secretariat on 02/09/2018 BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM DIVISION OF MONETARY AFFAIRS FOMC SECRETARIAT Date: January 14, 2011 To: Governors and Reserve Bank Presidents From: Deborah J. Danker Subject: Request for January Projections As part of the upcoming policy cycle, FOMC meeting participants are requested to submit their quarterly economic projections. Attached to this cover note is a timeline of the projections process (Attachment 1), a description of the scope of the projections and narrative (Attachment 2), and an updated version of the usual table providing background information on forecast uncertainty (Attachment 3). Please note that your projections are due by 5:00 pm Eastern Time on Friday, January 21 (a link to the electronic collection system will be sent to users early next week). Page 1 of 5 Authorized for public release by the FOMC Secretariat on 02/09/2018 Attachment 1 January Projections Timeline January 14 (Friday) Request for participants’ projections January 17 (Monday) Martin Luther King Jr. Day observed January 18 (Tuesday) Projections template made available via Lotus Notes email link January 21 (Friday) Initial projections due by 5:00 pm ET January 24 (Monday) Initial summary projections package distributed to FOMC participants January 25 (Tuesday) First day of FOMC meeting; Briefing on participants’ projections and narratives January 26 (Wednesday) Second day of FOMC meeting January 27 (Thursday) Final projections due by 5:00 pm ET January 28 (Friday) Final summary projections package distributed to FOMC participants February 3 (Thursday) First draft of the minutes and Summary of Economic Projections (SEP) distributed to participants February 8 (Tuesday) Second draft of the minutes and SEP distributed to participants February 10 (Thursday) Final version of the minutes and SEP distributed for notation vote February 15 (Tuesday) Voting on minutes and SEP closes at noon ET February 16 (Wednesday) Minutes and SEP published at 2:00 pm ET Page 2 of 5 Authorized for public release by the FOMC Secretariat on 02/09/2018 Attachment 2 Scope of the January Projections Variables and Periods: 2011-2013: Please provide your projections of the most likely outcomes for the percent change in real GDP (Q4/Q4), the percent change in the chain-weighted price index for PCE and for core PCE (Q4/Q4), and the level of the unemployment rate (Q4 average) for 2011, 2012 and 2013. Please also provide your current estimates for the annualized percent change in real GDP, the total PCE price index, and the core PCE price index in the first half of 2011, i.e. Q22011/Q42010. Please express all of these projections to the nearest tenth of a percentage point (for example, 2.5 percent). Longer Run: Please provide your best assessment of the rate to which the variables below would converge over the longer run (say, five to six years from now) in the absence of shocks and assuming appropriate monetary policy. If you anticipate that the convergence process will take shorter or longer than about five or six years, please indicate your best estimate of the duration of the convergence process. Please provide your estimates as single numbers (that is, not as ranges), rounded to tenths of a percentage point. You may also include in your submission any explanatory comments that you think would be helpful. 1. Change in real GDP (percent, annual rate) 2. Civilian unemployment rate (percent) 3. Total PCE inflation rate (percent, annual rate) Judgments about Uncertainty and Risks: Please also indicate whether you judge that the uncertainty attached to your projections for each variable is higher/lower/broadly similar to levels of uncertainty over the past 20 years, and also whether the risks around your projections for each variable are weighted to the upside/downside/broadly balanced. As with your modal projections, these judgments concerning the uncertainty and risks attached to your projections should be based on the assumption that the System pursues an Page 3 of 5 Authorized for public release by the FOMC Secretariat on 02/09/2018 appropriate monetary policy. We have provided an updated table summarizing a range of alternative measures of past forecast uncertainty as background for your judgments. Underlying Assumptions: As before, no common assumptions are proposed for fiscal policy and other exogenous factors, such as energy prices. However, if your assumptions for these types of variables differ materially from those in the Tealbook forecast, it would be helpful if this was noted in your narrative. With respect to monetary policy, projections should be based on the assumption that the System pursues what, in your judgment, would be an appropriate monetary policy, i.e., a policy that is most likely to achieve paths for economic activity and inflation that best satisfy your interpretation of the dual economic objectives. To aid the interpretation of your projections, it would be appreciated if you would indicate whether your monetary policy path deviates materially from the path assumed by the staff in the Tealbook and, if so, in what way. These deviations can be described qualitatively or, if you prefer, quantitatively. Narrative: The value of the projections process would be increased greatly if you could supply a narrative of the key considerations shaping your outlook. Some possible headings to help structure your narrative are suggested below (and are included in the online template for submitting projections). Please describe the key factors shaping your central economic outlook and the uncertainty and risks around that outlook. Please describe any important differences between your current economic forecast and the Tealbook. Please describe the key factors causing your forecasts to change since the projections submitted for the November FOMC meeting. Page 4 of 5 Authorized for public release by the FOMC Secretariat on 02/09/2018 Attachment 3 Table 1: Historical Projection Errors Root Mean Squared Errors of Winter Projections for 1990 to 20091 Real GDP2 (percent change, Q4 to Q4) 2011 2012 2013 Source 4 Monetary Policy Report Federal Reserve staff (Greenbook) Congressional Budget Office Administration Blue Chip Survey of Professional Forecasters Average 1. 2. 3. 4. 5. 6. 7. Unemployment Rate (Q4 average) 2011 2012 2013 Consumer prices3 (percent change, Q4 to Q4) 2011 2012 2013 1.20 1.29 1.36 1.45 1.24 1.24 — 1.63 1.79 1.83 1.64 1.725 — — 1.905 1.79 — — 0.65 0.68 0.396,7 0.78 0.64 0.60 — 1.37 1.156 1.49 1.42 1.156 — — 1.386 1.57 — — — 1.05 0.98 0.99 0.93 0.95 — 1.09 1.01 1.12 1.01 1.00 — — 1.045 1.07 — — 1.30 1.72 1.84 0.67 1.31 1.47 0.98 1.04 1.05 For methodological details and discussion see “Gauging the Uncertainty of the Economic Outlook from Historical Forecasting Errors” by David Reifschneider and Peter Tulip (Finance and Economics Discussion Series 2007-60). The table above is updated to include forecasts and outcomes for 2007 through 2009 (data which became available after the FEDS paper was released) and minor methodological changes. Real GNP before 1992. Based on the total consumer price index. Evidence based on Federal Reserve staff projections suggests that, on average, forecast errors for CPI inflation are slightly larger than those for PCE inflation. Monetary Policy Report projections equal the mid-points of the published central tendency ranges. Results for inflation are not reported because the forecast price measure has changed over time. Percent change, calendar year over calendar year. Annual average. Not included in average. Page 5 of 5
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