Full text of Federal Open Market Committee Meeting Minutes, Transcripts, and Other Documents : Meeting, June 12-13, 2018 : SEP: Individual Projections

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

SEP: Compilation and Summary of Individual Economic Projections

June 12–13, 2018

Table 1. Economic projections of Federal Reserve Board members and Federal Reserve Bank presidents,
under their individual assessments of projected appropriate monetary policy, June 2018
Percent

Variable
Change in real GDP
March projection

Median1
Central tendency2
Range3
2018 2019 2020 Longer 2018
2019
2020
2018
2019
2020
Longer
Longer
run
run
I
I
I
I
I
I
I
I
I run
2.8
2.4
2.0
1.8
2.7 – 3.0 2.2 – 2.6 1.8 – 2.0 1.8 – 2.0 2.5 – 3.0 2.1 – 2.7 1.5 – 2.2 1.7 – 2.1
2.7
2.4
2.0
1.8
2.6 – 3.0 2.2 – 2.6 1.8 – 2.1 1.8 – 2.0 2.5 – 3.0 2.0 – 2.8 1.5 – 2.3 1.7 – 2.2

Unemployment rate
March projection

3.6
3.8

3.5
3.6

3.5
3.6

4.5
4.5

3.6 – 3.7 3.4 – 3.5 3.4 – 3.7 4.3 – 4.6 3.5 – 3.8 3.3 – 3.8 3.3 – 4.0 4.1 – 4.7
3.6 – 3.8 3.4 – 3.7 3.5 – 3.8 4.3 – 4.7 3.6 – 4.0 3.3 – 4.2 3.3 – 4.4 4.2 – 4.8

PCE infation
March projection

2.1
1.9

2.1
2.0

2.1
2.1

2.0
2.0

2.0 – 2.1 2.0 – 2.2 2.1 – 2.2
1.8 – 2.0 2.0 – 2.2 2.1 – 2.2

Core PCE infation4
March projection

2.0
1.9

2.1
2.1

2.1
2.1

2.4
2.1

3.1
2.9

3.4
3.4

1.9 – 2.0 2.0 – 2.2 2.1 – 2.2
1.8 – 2.0 2.0 – 2.2 2.1 – 2.2

2.0
2.0

2.0 – 2.2 1.9 – 2.3 2.0 – 2.3
1.8 – 2.1 1.9 – 2.3 2.0 – 2.3

2.0
2.0

1.9 – 2.1 2.0 – 2.3 2.0 – 2.3
1.8 – 2.1 1.9 – 2.3 2.0 – 2.3

Memo: Projected
appropriate policy path
Federal funds rate
March projection

2.9
2.9

2.1 – 2.4 2.9 – 3.4 3.1 – 3.6 2.8 – 3.0 1.9 – 2.6 1.9 – 3.6 1.9 – 4.1 2.3 – 3.5
2.1 – 2.4 2.8 – 3.4 3.1 – 3.6 2.8 – 3.0 1.6 – 2.6 1.6 – 3.9 1.6 – 4.9 2.3 – 3.5

Note: Projections of change in real gross domestic product (GDP) and projections for both measures of infation are percent changes from the
fourth quarter of the previous year to the fourth quarter of the year indicated. PCE infation and core PCE infation 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 projections for the
federal funds rate are the value of the midpoint of the projected appropriate target range for the federal funds rate or the projected appropriate target
level for the federal funds rate at the end of the specifed calendar year or over the longer run. The March projections were made in conjunction with
the meeting of the Federal Open Market Committee on March 20–21, 2018. One participant did not submit longer-run projections for the change in real
GDP, the unemployment rate, or the federal funds rate in conjunction with the March 20–21, 2018, meeting, and one participant did not submit such
projections in conjunction with the June 12–13, 2018, meeting.
1. For each period, the median is the middle projection when the projections are arranged from lowest to highest. When the number of projections
is even, the median is the average of the two middle projections.
2. The central tendency excludes the three highest and three lowest projections for each variable in each year.
3. The range for a variable in a given year includes all participants’ projections, from lowest to highest, for that variable in that year.
4. Longer-run projections for core PCE infation are not collected.

Authorized for Public Release

Page 1 of 38

SEP: Compilation and Summary of Individual Economic Projections

June 12–13, 2018

Table 1.A. Economic projections for the frst half of 2018*
(in percent)

Medians, central tendencies, and ranges
Median

Central tendency

Range

Change in real GDP
March projection

2.8
2.5

2.8 – 2.9
2.4 – 2.6

2.5 – 3.1
2.2 – 2.7

PCE infation
March projection

2.3
2.0

2.2 – 2.3
1.9 – 2.0

1.9 – 2.3
1.7 – 2.3

Core PCE infation
March projection

2.1
2.0

2.1
1.9 – 2.1

1.8 – 2.2
1.7 – 2.1

Participants’ projections
Projection

Change in real GDP

PCE infation

Core PCE infation

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15

3.0
2.9
2.8
2.8
2.8
2.8
2.9
3.1
2.8
2.8
2.8
2.8
2.8
3.0
2.5

2.3
2.3
2.3
2.2
2.3
2.3
2.3
2.3
2.2
2.1
2.3
1.9
2.3
2.3
2.0

2.1
2.1
2.1
2.1
2.2
2.1
2.1
2.1
2.1
2.1
2.1
1.8
2.1
2.1
2.1

* Growth and infation are reported at annualized rates.

Authorized for Public Release

Page 2 of 38

SEP: Compilation and Summary of Individual Economic Projections

June 12–13, 2018

Table 1.B. Economic projections for the second half of 2018*
(in percent)

Medians, central tendencies, and ranges
Median

Central tendency

Range

Change in real GDP
March projection

2.8
3.0

2.6 – 3.0
2.7 – 3.3

2.5 – 3.2
2.5 – 3.5

PCE infation
March projection

1.9
1.9

1.9 – 2.1
1.6 – 2.0

1.8 – 2.1
1.6 – 2.3

Core PCE infation
March projection

1.9
1.9

1.7 – 1.9
1.7 – 2.0

1.7 – 2.2
1.5 – 2.1

Participants’ projections
Projection

Change in real GDP

PCE infation

Core PCE infation

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15

2.6
2.5
2.8
3.2
2.8
2.8
2.7
2.9
3.2
2.6
3.0
2.8
2.6
3.0
2.5

1.9
1.9
2.1
2.0
1.9
1.9
1.9
1.9
1.8
1.9
2.1
2.1
1.9
2.1
2.0

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

* Projections for the second half of 2018 implied by participants’ June projections for the frst half of 2018 and for
2018 as a whole. Growth and infation are reported at annualized rates.

Authorized for Public Release

Page 3 of 38

SEP: Compilation and Summary of Individual Economic Projections

June 12–13, 2018

Table 2. June economic projections, 2018–20 and over the longer run (in
percent)
Projection

Year

Change in
real GDP

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15

2018
2018
2018
2018
2018
2018
2018
2018
2018
2018
2018
2018
2018
2018
2018

2.8
2.7
2.8
3.0
2.8
2.8
2.8
3.0
3.0
2.7
2.9
2.8
2.7
3.0
2.5

3.6
3.6
3.7
3.7
3.6
3.6
3.6
3.5
3.8
3.7
3.6
3.7
3.5
3.6
3.7

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15

2019
2019
2019
2019
2019
2019
2019
2019
2019
2019
2019
2019
2019
2019
2019

2.1
2.1
2.4
2.6
2.1
2.2
2.4
2.4
2.7
2.6
2.6
2.4
2.2
2.4
2.3

3.4
3.5
3.7
3.4
3.4
3.5
3.5
3.3
3.8
3.5
3.3
3.7
3.3
3.4
3.5

Authorized for Public Release

Unemployment
PCE
rate
infation

Page 4 of 38

Core PCE
infation

Federal
funds rate

2.1
2.1
2.2
2.1
2.1
2.1
2.1
2.1
2.0
2.0
2.2
2.0
2.1
2.2
2.0

2.0
2.0
2.0
1.9
2.0
1.9
2.0
2.0
1.9
1.9
2.0
2.0
1.9
2.1
2.0

2.13
2.13
2.38
1.88
2.63
2.38
2.13
2.13
2.13
2.38
2.38
1.88
2.38
2.38
2.38

2.2
2.1
2.1
2.0
2.2
1.9
2.3
2.0
2.0
2.0
2.1
2.0
2.1
2.3
2.1

2.2
2.2
2.1
2.0
2.2
2.0
2.3
2.0
2.1
2.0
2.1
2.0
2.1
2.3
2.1

2.88
2.63
2.88
2.13
3.38
3.38
2.88
3.13
2.88
3.63
3.13
1.88
3.13
3.13
3.38

SEP: Compilation and Summary of Individual Economic Projections

June 12–13, 2018

Table 2. (continued)
Projection

Year

Change in
real GDP

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15

2020
2020
2020
2020
2020
2020
2020
2020
2020
2020
2020
2020
2020
2020
2020

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

3.6
3.7
3.8
3.4
3.5
3.5
3.7
3.5
3.8
3.5
3.3
4.0
3.4
3.4
3.5

2.2
2.2
2.1
2.1
2.3
2.1
2.1
2.1
2.1
2.0
2.1
2.0
2.1
2.3
2.1

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15

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

1.8
1.8
2.0
1.7
1.7
1.7
2.0
1.8
2.1
2.0
1.9

4.6
4.2
4.5
4.1
4.7
4.6
4.5
4.3
4.5
4.5
4.4

1.9
1.8
1.8

4.3
4.3
4.6

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

Unemployment
PCE
rate
infation

Page 5 of 38

Core PCE
infation

Federal
funds rate

2.2
2.2
2.1
2.1
2.3
2.2
2.1
2.1
2.1
2.0
2.1
2.0
2.1
2.3
2.1

3.13
2.63
3.38
2.63
4.13
3.50
3.38
3.25
3.63
3.63
3.38
1.88
3.38
3.63
4.13
2.63
2.75
3.50
2.25
2.75
2.50
3.00
2.75
3.25
3.00
3.00
2.75
3.00
3.00

SEP: Compilation and Summary of Individual Economic Projections

June 12–13, 2018

Figure 1. Medians, central tendencies, and ranges of economic projections, 2018–20 and over the longer run
Percent

Change in real GDP
Median of projections
Central tendency of projections
Range of projections

3

Actual

2

1

2013

2014

2015

2016

2017

2018

2019

2020

Longer
run
Percent

Unemployment rate
7
6
5
4
3

2013

2014

2015

2016

2017

2018

2019

2020

Longer
run
Percent

PCE inflation
3

2

1

2013

2014

2015

2016

2017

2018

2019

2020

Longer
run
Percent

Core PCE inflation
3

2

1

2013

2014

2015

2016

2017

2018

2019

2020

Longer
run

Note: Definitions of variables and other explanations are in the notes to table 1. The data for the actual values of
the variables are annual.

Authorized for Public Release

Page 6 of 38

SEP: Compilation and Summary of Individual Economic Projections

June 12–13, 2018

Figure 2. FOMC participants’ assessments of appropriate monetary policy: Midpoint of target range or target level for
the federal funds rate

Percent

5.0

4.5

4.0

3.5

3.0

2.5

2.0

1.5

1.0

0.5

0.0

2018

2019

2020

Longer run

Note: Each shaded circle indicates the value (rounded to the nearest 1/8 percentage point) of an individual participant’s judgment of the midpoint of the appropriate target range for the federal funds rate or the appropriate target
level for the federal funds rate at the end of the specified calendar year or over the longer run. One participant did not
submit longer-run projections for the federal funds rate.

Authorized for Public Release

Page 7 of 38

SEP: Compilation and Summary of Individual Economic Projections

June 12–13, 2018

Figure 4.A. Uncertainty and risks in projections of GDP growth

Median projection and confidence interval based on historical forecast errors

Percent

Change in real GDP
Median of projections
70% confidence interval

4

3

2

Actual

1

0

2013

2014

2015

2016

2017

2018

2019

2020

FOMC participants’ assessments of uncertainty and risks around their economic projections
Number of participants

Uncertainty about GDP growth

Risks to GDP growth

June projections
March projections

Lower

Number of participants

18
16
14
12
10
8
6
4
2

Broadly
similar

Higher

June projections
March projections

Weighted to
downside

18
16
14
12
10
8
6
4
2

Broadly
balanced

Weighted to
upside

Note: The blue and red lines in the top panel show actual values and median projected values, respectively, of the
percent change in real gross domestic product (GDP) from the fourth quarter of the previous year to the fourth quarter
of the year indicated. The confidence interval around the median projected values is assumed to be symmetric and is
based on root mean squared errors of various private and government forecasts made over the previous 20 years; more
information about these data is available in table 2. Because current conditions may differ from those that prevailed,
on average, over the previous 20 years, the width and shape of the confidence interval estimated on the basis of the
historical forecast errors may not reflect FOMC participants’ current assessments of the uncertainty and risks around
their projections; these current assessments are summarized in the lower panels. Generally speaking, participants who
judge the uncertainty about their projections as “broadly similar” to the average levels of the past 20 years would view
the width of the confidence interval shown in the historical fan chart as largely consistent with their assessments of
the uncertainty about their projections. Likewise, participants who judge the risks to their projections as “broadly
balanced” would view the confidence interval around their projections as approximately symmetric. For definitions of
uncertainty and risks in economic projections, see the box “Forecast Uncertainty.”

Authorized for Public Release

Page 8 of 38

SEP: Compilation and Summary of Individual Economic Projections

June 12–13, 2018

Figure 4.B. Uncertainty and risks in projections of the unemployment rate

Median projection and confidence interval based on historical forecast errors

Percent

Unemployment rate

10

Median of projections
70% confidence interval

9
8
7
6

Actual
5
4
3
2
1

2013

2014

2015

2016

2017

2018

2019

2020

FOMC participants’ assessments of uncertainty and risks around their economic projections
Number of participants

Uncertainty about the unemployment rate
June projections
March projections

Lower

Number of participants

Risks to the unemployment rate
18
16
14
12
10
8
6
4
2

Broadly
similar

Higher

June projections
March projections

Weighted to
downside

18
16
14
12
10
8
6
4
2

Broadly
balanced

Weighted to
upside

Note: The blue and red lines in the top panel show actual values and median projected values, respectively, of
the average civilian unemployment rate in the fourth quarter of the year indicated. The confidence interval around
the median projected values is assumed to be symmetric and is based on root mean squared errors of various private
and government forecasts made over the previous 20 years; more information about these data is available in table 2.
Because current conditions may differ from those that prevailed, on average, over the previous 20 years, the width
and shape of the confidence interval estimated on the basis of the historical forecast errors may not reflect FOMC
participants’ current assessments of the uncertainty and risks around their projections; these current assessments are
summarized in the lower panels. Generally speaking, participants who judge the uncertainty about their projections as
“broadly similar” to the average levels of the past 20 years would view the width of the confidence interval shown in the
historical fan chart as largely consistent with their assessments of the uncertainty about their projections. Likewise,
participants who judge the risks to their projections as “broadly balanced” would view the confidence interval around
their projections as approximately symmetric. For definitions of uncertainty and risks in economic projections, see the
box “Forecast Uncertainty.”

Authorized for Public Release

Page 9 of 38

SEP: Compilation and Summary of Individual Economic Projections

June 12–13, 2018

Figure 4.C. Uncertainty and risks in projections of PCE inflation

Median projection and confidence interval based on historical forecast errors

Percent

PCE inflation
Median of projections
70% confidence interval

3

2

1
Actual
0

2013

2014

2015

2016

2017

2018

2019

2020

FOMC participants’ assessments of uncertainty and risks around their economic projections
Number of participants

Uncertainty about PCE inflation

Risks to PCE inflation

June projections
March projections

Lower

Number of participants

June projections
March projections

18
16
14
12
10
8
6
4
2

Broadly
similar

Higher

Weighted to
downside

18
16
14
12
10
8
6
4
2

Broadly
balanced

Number of participants

Uncertainty about core PCE inflation

Number of participants

Risks to core PCE inflation

June projections
March projections

Lower

18
16
14
12
10
8
6
4
2

Broadly
similar

Weighted to
upside

Higher

June projections
March projections

Weighted to
downside

18
16
14
12
10
8
6
4
2

Broadly
balanced

Weighted to
upside

Note: The blue and red lines in the top panel show actual values and median projected values, respectively, of the
percent change in the price index for personal consumption expenditures (PCE) from the fourth quarter of the previous
year to the fourth quarter of the year indicated. The confidence interval around the median projected values is assumed
to be symmetric and is based on root mean squared errors of various private and government forecasts made over the
previous 20 years; more information about these data is available in table 2. Because current conditions may differ from
those that prevailed, on average, over the previous 20 years, the width and shape of the confidence interval estimated
on the basis of the historical forecast errors may not reflect FOMC participants’ current assessments of the uncertainty
and risks around their projections; these current assessments are summarized in the lower panels. Generally speaking,
participants who judge the uncertainty about their projections as “broadly similar” to the average levels of the past
20 years would view the width of the confidence interval shown in the historical fan chart as largely consistent with their
assessments of the uncertainty about their projections. Likewise, participants who judge the risks to their projections
as “broadly balanced” would view the confidence interval around their projections as approximately symmetric. For
definitions of uncertainty and risks in economic projections, see the box “Forecast Uncertainty.”

Authorized for Public Release

Page 10 of 38

SEP: Compilation and Summary of Individual Economic Projections

June 12–13, 2018

Table 3. Uncertainty and risks

Question 2(a): Please indicate your judgment of the uncertainty attached
to your projections relative to levels of uncertainty over the past 20 years.
Individual responses
Respondent

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

Change in real GDP
Unemployment rate
PCE Infation
Core PCE Infation

B
B
B
B

B
B
B
B

B
B
B
B

B
B
B
B

B
B
B
B

B
B
B
B

A
A
B
B

B
B
B
B

B
B
B
B

B
B
B
B

B
B
B
B

B
B
B
B

B
B
B
B

B
B
A
A

B
B
B
B

A = Higher

B = Broadly similar

C = Lower

Question 2(b): Please indicate your judgment of the risk weighting around
your projections.
Individual responses
Respondent

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

Change in real GDP
Unemployment rate
PCE Infation
Core PCE Infation

B
B
B
B

B
B
B
B

B
B
B
B

B
B
B
B

B
B
B
B

B
B
B
B

A
C
B
B

B
B
B
B

B
C
B
B

B
B
B
B

B
B
B
B

A
B
A
A

C
A
B
B

B
B
B
B

B
B
B
B

A = Weighted to upside

Authorized for Public Release

B = Broadly balanced

Page 11 of 38

C = Weighted to downside

SEP: Compilation and Summary of Individual Economic Projections

June 12–13, 2018

Figure 5. Uncertainty in projections of the federal funds rate

Median projection and confidence interval based on historical forecast errors

Percent

Federal funds rate
Midpoint of target range
Median of projections
70% confidence interval*

6
5
4
3
2
1

Actual

0

2013

2014

2015

2016

2017

2018

2019

2020

Note: The blue and red lines are based on actual values and median projected values, respectively, of the Committee’s target for the federal funds rate at the end of the year indicated. The actual values are the midpoint of the
target range; the median projected values are based on either the midpoint of the target range or the target level.
The confdence interval around the median projected values is based on root mean squared errors of various private
and government forecasts made over the previous 20 years. The confdence interval is not strictly consistent with the
projections for the federal funds rate, primarily because these projections are not forecasts of the likeliest outcomes for
the federal funds rate, but rather projections of participants’ individual assessments of appropriate monetary policy.
Still, historical forecast errors provide a broad sense of the uncertainty around the future path of the federal funds rate
generated by the uncertainty about the macroeconomic variables as well as additional adjustments to monetary policy
that may be appropriate to o set the e ects of shocks to the economy.
The confdence interval is assumed to be symmetric except when it is truncated at zero—the bottom of the lowest
target range for the federal funds rate that has been adopted in the past by the Committee. This truncation would
not be intended to indicate the likelihood of the use of negative interest rates to provide additional monetary policy
accommodation if doing so was judged appropriate. In such situations, the Committee could also employ other tools,
including forward guidance and large-scale asset purchases, to provide additional accommodation. Because current
conditions may di er from those that prevailed, on average, over the previous 20 years, the width and shape of the
confdence interval estimated on the basis of the historical forecast errors may not refect FOMC participants’ current
assessments of the uncertainty and risks around their projections.
* The confdence interval is derived from forecasts of the average level of short-term interest rates in the fourth
quarter of the year indicated; more information about these data is available in table 2. The shaded area encompasses
less than a 70 percent confdence interval if the confdence interval has been truncated at zero.

Authorized for Public Release

Page 12 of 38

SEP: Compilation and Summary of Individual Economic Projections

June 12–13, 2018

Longer-run Projections
Question 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: We are at or very near our infation target, but likely headed well past full employment. The
challenge is to gradually rein in growth–leaving the economy vulnerable to policy missteps and adverse shocks.
Full convergence is likely to take at least 5 years.

Respondent 2: N/A
Respondent 3: N/A
Respondent 4: N/A
Respondent 5: The forecast for the rest of this year and next calls for further declines in the unemployment
rate. Thereafter, the growth rate of the economy will need to slow below potential for a prolonged period of time
in order to achieve a soft landing. The historical record, however, suggests that the “growth recession” implicit
in a soft landing scenario runs a high risk of morphing into a full-blown recession. In sum, while a purely modeldriven forecast would suggest convergence to the equilibrium unemployment rate from below around 2024-25, the
probability that the projected soft landing will not materialize in practice is sizable.

Respondent 6: Our dual mandate goals are reached by 2019. However, it will take some more time to
achieve complete convergence to longer-run levels. The e ects from sustained accommodative monetary policy
will generate a modest degree of overshooting of infation and an unemployment rate that remains well below the
natural rate for a number of years, before returning back to longer-run levels. Recent data show no indication of a
shift in longer-run levels of GDP growth or the unemployment rate.
Respondent 7: I anticipate that the economy will converge to my longer-run projection within 5 years
Respondent 8: N/A
Respondent 9: N/A
Respondent 10: N/A
Respondent 11: N/A
Respondent 12: We expect headline and core infation of 2.0 percent in 2018 and beyond, but GDP growth and
unemployment are expected to deviate from their long-run values conditional on the current regime. This regime,
characterized by low productivity growth and a low real interest rate on short-term government debt, features GDP
growth of 2.0 percent, an unemployment rate of 4.5 percent, and infation of 2.0 percent. The projected deviations,
due in part to federal stimulus, are expected to be temporary. We project that overshooting of GDP growth will
end in 2020 and the undershooting of unemployment will end in 2021. Because there are multiple medium term
outcomes, we cannot provide a single set of projections for GDP growth and unemployment. Calculating an average
of these variables based on multiple outcomes is potentially misleading. We do provide a 2.0 percent longer-run
infation projection that is independent of the regime.

Respondent 13: N/A

Authorized for Public Release

Page 13 of 38

SEP: Compilation and Summary of Individual Economic Projections

June 12–13, 2018

Respondent 14: We still assume the potential GDP growth rate is 1.8 percent. We continue to judge that
the longer-run normal rate of unemployment is between 4 and 6 percent, and place the mode of that distribution
in the lower half of that interval at 4.3 percent.
At this time, we tentatively judge that any supply-side impacts from fscal, trade, and immigration policies
will have only a limited e ect on potential GDP growth and the longer-run normal rate of unemployment. We will
continue to monitor the impact of policy changes on these variables.
Based on our scenario analysis of labor fows and the historical behavior of the unemployment rate in long
expansions, we project that the unemployment rate will be signifcantly below its longer-run normal level through
2020, and probably not return to that level until at least few years into that decade.
We assume that long-term infation expectations will remain anchored at levels consistent with the FOMC’s
longer-run objective. Under these conditions and with the projected undershooting of the longer-run normal
unemployment rate over the forecast horizon, we expect infation as measured by the PCE price index to be mildly
above the FOMC’s longer-run objective in 2019-20, before returning to that level early in the next decade.
Respondent 15: Having essentially achieved our objectives for infation and unemployment, the current
stance of monetary policy will likely cause a further decline of the unemployment rate below its longer-run level.
Policy rates will need to adjust over several years to bring unemployment back in line with the longer-run objective
and ensure sustainable economic growth with price stability.
I reduced my estimate of the longer-run unemployment rate in light of the downward unemployment surprises
since September 2017, when I last revised this estimate. A lower longer-run unemployment rate is consistent with
ongoing demographic changes, such as the aging of the workforce.

Authorized for Public Release

Page 14 of 38

SEP: Compilation and Summary of Individual Economic Projections

June 12–13, 2018

Uncertainty and Risks
Question 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: Near-term uncertainty is likely somewhat below average. Uncertainty two or three years out
may be above average: We have seldom succeeded in stabilizing the unemployment rate–much less engineering
a non-trivial increase in unemployment–without triggering a recession. Strong, unpredictable fscal- and tradepolicy crosswinds have the potential to make the convergence process more-than-usually challenging.

Respondent 2: N/A
Respondent 3: N/A
Respondent 4: The current level of uncertainty lies somewhere between the low levels experienced during the
Great Moderation and the high levels experienced during the fnancial crisis and its immediate aftermath.
Respondent 5: While the forecasting exercise under current conditions may not be as uncertain as during
the Great Recession, it is worth noting that spells with an economy signifcantly above full employment for a
considerable amount of time – the kind of scenario implied by our forecast – have been rare in the post-WWII
period. Therefore, there is uncertainty about the ability of our forecasting models to capture adequately some of
the relevant features associated with the current state of the economy.
Respondent 6: Uncertainty about my projection for economic activity and infation is similar to its average
level over the past 20 years. Infation remains anchored by stable longer-run infation expectations at the FOMC’s
stated goal of 2 percent.

Respondent 7: Uncertainty surrounding output growth and unemployment remains elevated by heightened
uncertainty about the e ects of fscal stimulus on an economy that is near full employment. Trade policy is a source
of increased uncertainty as well. The impact on infation uncertainty is small given how fat the Phillips curve
seems to be.

Respondent 8: Changes to the tax code and the Bipartisan Budget Act (BBA) continue to add uncertainty
to the outlook. Tax cuts will boost consumption and investment and the BBA will increase government spending
over the next few years. However, the magnitude and timing of the fscal impulse and the multiplier and crowding
out e ects are all uncertain. The potential for trade barriers to intensify adds uncertainty both in terms of the
impact of the policies ultimately enacted (or not) and through its current and prospective infuence on business
sentiment and spending. These considerations raise the uncertainty of our projections for real activity, but not by
enough to move us out of the “broadly similar” uncertainty box. Recent data have lowered our uncertainty about
the infation outlook somewhat, but, as with growth, it remains broadly similar to historical uncertainty for the
infation projection.

Respondent 9: N/A
Respondent 10: N/A
Respondent 11: N/A
Respondent 12: N/A

Authorized for Public Release

Page 15 of 38

SEP: Compilation and Summary of Individual Economic Projections

June 12–13, 2018

Respondent 13: As noted under question 2b, risks concerning the global outlook are greater than they
were earlier in the year. While these heightened risks don’t yet tilt the balance to notably greater-than-average
uncertainty, the degree of uncertainty is clearly greater than it was late last year.

Respondent 14: Ours is a quantitative judgment based on the widths of the probability intervals from the
New York Fed forecast distributions for real GDP growth and core PCE infation. For infation, the increased
prospects for the imposition of signifcantly restrictive trade and immigration policies in the U.S. has increased
uncertainty around the outlook to somewhat above the SEP standard. This factor also increases the uncertainty
around the real growth outlook; however, continued indications that the U.S. economy is progressing roughly
along the lines of our outlook suggest some o setting reduction in uncertainty. Consequently, we assess that the
uncertainty around the real growth outlook has not changed signifcantly since the March SEP and remains near
the SEP standard.
Respondent 15: N/A

Authorized for Public Release

Page 16 of 38

SEP: Compilation and Summary of Individual Economic Projections

June 12–13, 2018

Uncertainty and Risks (continued)
Question 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: N/A
Respondent 2: N/A
Respondent 3: N/A
Respondent 4: Risks are roughly balanced. On the one hand, the e ective lower bound limits monetary
policy’s ability to respond to negative shocks. On the other, the recent changes in fscal policy present increased
upside risks to activity.
Respondent 5: Over the period 2018-2020, we view the risks around our projections as roughly balanced. At
a longer horizon, however, our baseline forecast delivers a soft landing from a very low level of the unemployment
rate to a higher level consistent with full employment. As already mentioned, these smooth transitions are rare
in practice. We would therefore judge the risks to our projection of real activity growth beyond 2020 as being
weighted to the downside.

Respondent 6: Risks to economic activity appear broadly balanced. There still remains uncertainty about
the e ects of recent tax and budget changes on the economic outlook. The possibility of retaliatory responses to
U.S. trade policies adds additional risk around the outlook

Respondent 7: I anticipate fscal stimulus from the tax reform and BBA through 2019 that will boost demand,
raise output growth, and lower the unemployment rate further. However, my uncertainty about the magnitude
of the e ect on demand from fscal stimulus remains high. Though I am concerned about possible adverse e ects
from international trade conficts, I have not yet factored that into my forecast.
Respondent 8: We see the risks to the outlook for both growth and infation as broadly balanced. In the near
term, domestic demand appears quite robust, and we may be underestimating its momentum. Overall, we see
the odds as roughly equal that fscal policy will result in a bit more, or a bit less, stimulus than we built into our
projection. Our projection does incorporate a fairly large fscal boost in 2018, and we see some risk that more of
the stimulus will occur later in the forecast period than we have assumed. Trade and international risks appear
to have become tilted to the downside, but not by enough to change our overall risk assessment. That said, these
risks could become more acute if developments in Italy generate fnancial stress that spreads to other Eurozone
countries, a strengthening dollar challenges emerging market economies, or trade barriers intensify. Indeed, the
reports from our contacts suggest that business concerns related to trade policy have increased since March and
some say that these worries could soon begin to have a measureable e ect on investment.
With regard to infation, we think the modest increase to our 2018 infation forecast balances the near-term
risks. Over the medium term, there is a risk that we’ve underestimated the underlying infationary pressures in our
forecast, particularly given our projection that the unemployment rate will average almost one percentage point
below our estimate of its natural rate over most of the projection period. However, on the downside, continued low
levels of infation compensation in fnancial markets and some surveys suggest low long run infation expectations
could hold back infation more than we assume in our baseline forecast. In addition, the international risks noted
above could generate a higher dollar and lower U.S. infation.

Respondent 9: N/A

Authorized for Public Release

Page 17 of 38

SEP: Compilation and Summary of Individual Economic Projections

June 12–13, 2018

Respondent 10: I continue to view the risks around my forecast as broadly balanced, conditional on a monetary
policy path that is slightly steeper than the median path in the March SEPs.
The underlying fundamentals of the domestic economy are healthy. The outlook for foreign economies remains
sound, with growth supported by accommodative monetary policy. Nonetheless, downside risks have risen in
the euro area surrounding the formation of an Italian government and fnancial stresses have increased in some
emerging market economies that face large current account defcits and external debt burdens.
Fiscal policy (the e ects of tax cuts and increased federal spending in the Bipartisan Budget Act) is an upside
risk to the forecast over the forecast horizon. The magnitude and timing of the e ects of fscal policy remain
uncertain but I expect the e ects to become apparent in the second half of this year and carry through over the
forecast horizon. I am estimating that the combined e ect will provide an additional 0.5 percentage point to Q4/Q4
GDP growth in 2018-2020, but there is an upside risk that the e ect could be larger. Beyond the forecast horizon,
these fscal policy actions pose some downside risk to the outlook because higher fscal defcits could necessitate
reduced fscal spending, an increase in taxes, and higher longer-term interest rates.
The uncertainty over trade policy poses a downside risk to the forecast, which could grow over time. Escalating
rhetoric of tari threats and retaliatory threats, along with steps toward actual tari actions and the lack of
progress in renegotiating trade agreements, raise the level of uncertainty in the economy. Higher uncertainty could
negatively a ect business investment apart from the impact of actual tari s.
I continue to see infation risks as roughly balanced, but this is contingent on a path of gradually increasing
policy rates. If policy were not expected to tighten over the forecast horizon, I would view infation risks as tilted
to the upside. Incoming data suggest that infation is frming. My modal forecast is that infation will move up to
2 percent on a sustained basis by the end of this year, and remain near 2 percent over the medium run.
If the dynamics of infation have fundamentally changed, then I may be underestimating the persistence of low
infation outcomes. But if labor markets tighten more than I expect, or if nonlinear Phillips curve dynamics begin
to kick in, infation could move higher than I anticipate, especially if the withdrawal of monetary accommodation is
slower than I’ve assumed. Even absent a change in the slope of the Phillips curve, a slower withdrawal of monetary
accommodation than I’ve assumed poses an upside risk to my infation forecast.
After depreciating over much of the past year, the dollar has begun to strengthen. I expect further appreciation
given the strength of the U.S. economy and prospects for tighter monetary policy. But the risks around the path
of the dollar are two-sided. A considerably stronger (weaker)-than-expected appreciation in the dollar poses a
downside (upside) risk to the infation forecast.
Risks to fnancial stability from very low interest rates appear to be contained so far. There does not seem to be
excessive leverage and banks are holding relatively high levels of capital and liquid assets. However, equity prices
still appear to be somewhat high relative to earnings even accounting for the low level of interest rates, reduced
tax rates, and the tempering of stock price increases this year. Commercial real estate valuations also continue
to be lofty. These signs, the relatively low level of interest rates, and the outlook for continued strength in the
economy suggest that fnancial stability risks could rise should we fail to remove monetary policy accommodation
at an appropriate pace.

Respondent 11: N/A
Respondent 12: With respect to GDP growth, the current productivity regime is low. A higher productivity
growth regime is possible, but we see no compelling reason to predict a switch at this time. Recent changes in
productivity growth still leave productivity in its low regime. However, as changes in fscal and regulatory policy
continue to impact the economy, we see the possibility of more rapid GDP growth. On the other hand, we see US
trade policy as generating some downward risk for growth.
Concerning unemployment, the current rate is at the low end for an economic expansion. If a recession were
to occur, the unemployment rate would rise substantially. We have no compelling reason to predict a recession
during the forecast horizon. US trade policy also raises the possibility of trade disruptions that might increase
unemployment. On the other hand, we also see the possibility of further declines in the unemployment rate if GDP
growth surprises on the upside. Federal stimulus associated with recent tax and spending changes might produce
such a surprise. Overall, we see the risks as balanced.
For core PCE infation, we place negligible weight on the prospects of Phillips Curve e ects. There is, however,
a risk that Phillips Curve e ects reassert themselves and infation moves higher as the unemployment rate falls.
It is also possible that infation expectations drift higher and become unanchored. In addition, federal stimulus
associated with recent tax and spending changes could push prices higher. Trade policy changes might also put

Authorized for Public Release

Page 18 of 38

SEP: Compilation and Summary of Individual Economic Projections

June 12–13, 2018

some upward pressure on import prices. Anecdotal reports are consistent with building price pressures. Thus, we
see the risks on this variable to be weighted to the upside.
For PCE infation, the risks are the same as for core PCE infation. In addition, the variable depends on the
behavior of energy prices. While an upward energy-price shock is a possibility, a case can also be made for some
downward drift in energy prices. Overall, we see the risks for PCE infation as weighted to the upside.

Respondent 13: There are several risks to the outlook, chiefy concerning the global outlook. First, while
the Italian political situation appears to be settled for the time being, the recent imbroglio is a reminder that the
rise of populist, euroskeptic governments continues to pose risks. Second, although rising U.S. interest rates have
been signaled for some time, their arrival seems to have led to heightened stress in a number of emerging-market
economies; with U.S. rates likely to rise further, these stresses may intensify. Finally, U.S. trade policy has become
even more aggressive in recent weeks, raising the risk of a widening trade war.
Respondent 14: Ours is a quantitative judgment based on the di erence between the central projection and
the expected value of the New York Fed forecast distribution. We see two-sided risks to real activity associated
with recent and possible future changes in government policies. On the one hand the recent changes in fscal
policies could have more positive supply-side and/or demand-side e ects than we currently anticipate; on the
other, government policies, particularly possible more restrictive trade and immigration policies, could lead to
adverse supply-side and demand-side e ects. Along with other risks, such as the possibility of stronger momentum
associated with robust household and business confdence, these forces appear to roughly o set, and so we judge
these risks to be roughly balanced over the forecast horizon.
We now see infation risks as roughly balanced, as opposed to the upside skew in our March submission. The
heightened prospects of more restrictive trade and immigration policies raise both upside and downside risks, as the
supply-side e ects of such policies raise upside risks while the demand-side e ects raise downside risks. Beyond the
risks associated with those policies, dollar appreciation and continued soft global infation data suggest somewhat
less upside risks than in March.
Respondent 15: N/A

Authorized for Public Release

Page 19 of 38

SEP: Compilation and Summary of Individual Economic Projections

June 12–13, 2018

Key Factors Informing Your Judgments regarding the
Appropriate Path of the Federal Funds Rate
Question 3(b). Please describe the key factors informing your judgments
regarding the appropriate path of the federal funds rate. If, in your
projections for any year in the projection period, the unemployment rate
for that year is close to or below your projection for its longer-run normal
level and infation for that year is close to or above 2 percent, and your
assessment of the appropriate level of the federal funds rate for that year
is still signifcantly below your assessment of its longer-run normal value,
please describe the factor or factors that you anticipate will make the
lower-than-normal funds rate appropriate. If you have revised your
estimate of the longer-run normal value of the federal funds rate since the
previous SEP, please indicate the factor or factors accounting for the
change. You may include any other comments on appropriate monetary
policy as well.
Respondent 1: Policy to date has kept nominal demand growth on a fairly steady, moderate path. This gives
me hope that a relatively gradual transition to a modestly restrictive monetary policy stance will be suÿcient to put
the economy on a path that sustains the expansion while holding infation to mandate-consistent levels. There are
two important risks to that scenario, working in opposite directions. First, there is a risk of disappointing growth
or fnancial instability overseas that could blow back onto U.S. fnancial markets, putting downward pressure on
r*. Shifting U.S. trade policy is unhelpful in this regard. Second, there is a risk that U.S. fscal policy will have
larger or more persistent positive e ects on real activity and r* than I currently anticipate. My base case continues
to be 3 rate hikes during 2018 and another 3 during 2019, but I will be keeping a close watch for signs of strain in
foreign fnancial markets, shifts in the U.S. economic outlook, and changes in the shape of the U.S. yield curve.

Respondent 2: My projection for the federal funds rate is informed by a simple policy rule with a gradual rise
in the short-run equilibrium funds rate.

Respondent 3: I believe that a gradual path of funds rate increases is likely to be appropriate for the next
few years, since I do not believe that infation is likely to increase rapidly. Accordingly, a gradual path should give
us the time and latitude to assess the data fow and make adjustments as necessary. In addition, my forecast for
labor productivity growth in the longer run is 1 1/2 percent per year, which is a key factor supporting my longer
run interest rate projection.

Respondent 4: Although infation appears to be frming, it has been running below our 2 percent target for
quite some time. While the labor market continues to strengthen with unemployment falling the past two months,
it is not clear that we have reached maximum employment as the labor force participation rate and employmentpopulation ratio for prime age persons remain well below their pre-recession levels, and wage growth remains
subdued. Given the persistent undershooting of our infation target, I believe that appropriate monetary policy
implies a very gradual path for the federal funds rate.

Respondent 5: With the economy running already well above full employment and a policy stance that is
still accommodative, it is diÿcult to chart an appropriate path for policy. Optimal control simulations prescribe a
higher path for the federal funds rate than the one penciled in here. A more aggressive policy tightening, however,
could increase the probability of a recession in ways that our linear models are unable to capture. Our projected
path for the federal funds rate tries to balance this concern against the concern that running an economy above full
employment for a prolonged period of time might create distortions that, too, increase the probability of a future
downturn. Given that the near term outlook calls for GDP growth well above potential, it may be appropriate to
reach a neutral level of the federal funds rate sooner rather than later, and then raise rates more gradually in 2019

Authorized for Public Release

Page 20 of 38

SEP: Compilation and Summary of Individual Economic Projections

June 12–13, 2018

and 2020 as the stance of monetary policy turns restrictive. Such a strategy would reduce the scope for further
declines in the unemployment rate, while providing policymakers with more time later to assess how the economy
responds to a contractionary stance, thus lowering the risk of tipping the economy into a recession.

Respondent 6: The labor market has exceeded full employment according to various measures and I expect
it to continue to strengthen over the next couple of years with impetus from fscal policy. Given the strong
momentum in the economy, I expect the unemployment rate to reach 3.5 percent by next year. With the economy
above potential, I anticipate infation will modestly overshoot our 2 percent objective in 2020.
My assessment of appropriate policy is generally informed by looking at simple rules that adjust for the zero
lower bound and assume a low natural rate of interest of 1/2 percent.
My fed funds rate path is fatter than some simple rules would suggest. This refects an infation rate that has
been rising only gradually toward our objective from below. Beyond the near term, I envision a path for the fed
funds rate that moderately overshoots its long-run level in 2019 and 2020 as policy acts to unwind the overshooting
in infation and labor market conditions.

Respondent 7: My projection for the appropriate path of the federal funds rate over the next three years is
unchanged from March. My forecasts for output growth and infation in 2018 are somewhat higher compared to
March based on incoming data and anticipated e ects of fscal stimulus. I am willing to accept infation that runs
modestly above the FOMC target over the medium term given the Committee’s symmetric infation objective.
Consequently, my path for the funds rate calls for a gradual pace of increases over the forecast horizon.

Respondent 8: We assume three total funds rate increases in 2018, leaving the funds rate in the range of 2.00
to 2.25 percent at the end of the year. We see the choice between three or four moves in 2018 as a close call and
could envision one more rate increase if infation expectations frm more noticeably as we move through the year.
In 2019, the policy rate moves modestly above our estimate of the long run neutral rate of 2.75 percent, reaching
3.00 to 3.25 percent at the end of the year and remaining at that moderately restrictive setting through 2020. We
assume balance sheet normalization proceeds according to the announced plan.
For some time, our view of appropriate monetary policy has been predicated on gradual increases in the funds
rate in order to frm infation expectations at 2 percent and ensure that infation is frmly on a trajectory toward
our symmetric 2 percent objective. A number of factors suggest this approach is working and that infation and
infation expectations are headed in the right direction: the recent infation data have frmed; reports from our
contacts point to higher wage and cost pressures, some of which are being passed through to prices; TIPS infation
compensation has moved up some over the past year; and some tentative model results suggest that the underlying
infation trend may have frmed a bit recently.
Nonetheless, the low levels of infation expectations in surveys and implied by TIPS pricing remind us of the
need to stay the course for a while longer, and our appropriate policy path remains modestly accommodative until
mid-2019. At that time, assuming infationary trends and expectations frm as we expect, we think it will be
appropriate to generate moderately restrictive fnancial conditions. In our forecast higher rates lead to growth
slightly below potential by 2020. Although our assumed rate path is fat between 2019 and 2020, we would be
prepared to move policy either way depending on events. Our policy trajectory is consistent with some modest
overshooting of our 2 percent infation objective in 2020, which we see as a virtue that will help to frm infation
expectations symmetrically around the 2 percent target.

Respondent 9: N/A
Respondent 10: I continue to view a gradual upward path for the funds rate as appropriate; the slope of
the path will depend on the evolution of the economy, medium run outlook, and the risks around the outlook, in
particular, for infation and labor markets.
Over the forecast horizon, I project growth above trend and the unemployment rate below my 4.5 percent
estimate of its longer-run level. Labor markets are tight and wages are accelerating. I anticipate that further
tightening in the labor market will translate into some continued frming in the labor compensation measures,
in line with anecdotal reports of increasing wage pressures across a range of skill groups. However, given slow
productivity growth, I expect wages to rise at a slower pace than in past expansions.

Authorized for Public Release

Page 21 of 38

SEP: Compilation and Summary of Individual Economic Projections

June 12–13, 2018

Infation is frming, as expected. Firms report increased price power; there is a rising number of reports that
frms are passing along higher input costs to their customers. Infation expectations are well anchored and the
economy is strong, so my modal projection is that infation will be sustainably at our goal by the end of this year
and remain there over the rest of the forecast horizon.
Given that monetary policy a ects the economy with a lag, I believe appropriate monetary policy should refect
both actual and projected progress toward the Committee’s goals. Based on the outlook and risks, I believe it will
be appropriate for the FOMC to move rates up over the course of the forecast horizon. This strategy would seem
to prudently balance the risk of stronger-than-expected growth leading to overheating in labor markets, which
would necessitate sharper, and potentially destabilizing, rate increases in the future versus the risk that infation
will continue to undershoot our goal, causing an unanchoring of infation expectations and possible loss of Fed
credibility. Indeed, the infation risks may be tilting to the upside, and that combined with strong growth and
strong labor markets has led me to steepen my policy path somewhat. With above-trend growth, labor markets
beyond full employment, and infation moving back to 2 percent by year-end, I believe it will be appropriate for the
funds rate to rise somewhat above my longer-run estimate of 3 percent in order to promote our longer-run goals of
maximum employment and price stability.

Respondent 11: My assessment of the appropriate path of the federal funds rate has not changed since the
previous SEP.

Respondent 12: A target of 1.88 percent for the forecast horizon is consistent with our assessment of current
economic conditions and for the convergence of infation, GDP growth, and unemployment to their values in a
regime characterized by low productivity growth and a low real interest rate on short-term government debt. In
the event of a regime change, such as a shift from low productivity growth to high productivity growth, our target
federal funds rate will change.
Respondent 13: My funds rate path refects two key considerations. First, owing to the recent fscal policy
changes, the short-run neutral rate is likely rising, and will may exceed its long-run level before too long. As a
consequence, the path of the federal funds rate will need to be higher than it would otherwise be. At the same time,
it is likely that underlying infation is currently running somewhat below the Committee’s 2 percent target. An
important part of raising that target will be actively signaling that the Committee is serious about achieving its
target – which will require patience in raising the funds rate. I believe that a gradual path of funds rate increases,
along the lines that I have penciled in above, will most appropriately balance these two considerations.
Respondent 14: The principal factors behind our assessment of the appropriate path for monetary policy are
the current state of the economy, our central economic outlook, and our balance of risks around the outlook. The
steepness of the policy path also depends on how overall fnancial conditions respond to our policy actions.
The near-term real growth outlook has improved, but the medium-term outlook is little changed since March.
Financial conditions have modestly tightened, the infation outlook has not changed signifcantly, and the risks
for infation have moved back toward balance. Consequently, our projection of the appropriate policy path is the
same as in the March SEP submission: the target FFR ranges at the end of 2018, 2019 and 2020 are 2 1/4 – 2 1/2
percent, 3 - 3 1/4 percent and 3 1/2 - 3 3/4 percent, respectively. We judge this policy stance as appropriate to ensure
achievement of the FOMC’s objectives over the longer run. Our policy path remains fairly shallow and is consistent
with the gradual rising path of the natural interest rate as projected by the New York Fed sta DSGE model.
Our estimate of the longer-run equilibrium real short-term interest rate remains in the range of 0 – 2 percent,
consistent with the estimates and forecasts from a variety of models. Adding the objective for infation (2 percent)
gives our estimated range for the nominal equilibrium rate as 2 – 4 percent. Our modal projection remains in the
center of this range, taking into account fairly subdued trend productivity growth, little change in longer-term
sovereign yields, and demographic factors. Consequently, as reported in the response to question 3(a), our point
estimate of the nominal equilibrium rate is still 3.0 percent. Our assessment of the appropriate policy path thus
slightly overshoots the longer-run FFR.

Respondent 15: My judgment regarding the appropriate path of the federal funds rate is predicated on
promoting sustainable economic growth and price stability. The economy has gone beyond full capacity and we
have essentially achieved price stability, yet I view the appropriate level of the federal funds rate to be below my

Authorized for Public Release

Page 22 of 38

SEP: Compilation and Summary of Individual Economic Projections

June 12–13, 2018

estimate of its longer-run level in 2018. That the federal funds rate is still low despite the economy’s return to full
employment and price stability refects the Committee’s past decisions, and I view a gradual path of the federal
funds rate as important to promote economic and fnancial stability. Balancing a gradual path of the federal funds
rate with accommodative monetary policy, stronger growth, lower unemployment, and higher infation, I believe
the funds rate will need to rise above its longer-run level in 2019 and beyond.

Authorized for Public Release

Page 23 of 38

SEP: Compilation and Summary of Individual Economic Projections

June 12–13, 2018

Forecast Narratives
Question 4(a). Please describe the key factors, potentially including your
assumptions about changes to government policies, shaping your central
economic outlook and the uncertainty and risks around that outlook.
Respondent 1: Near term, expansionary fscal policy and accommodative monetary policy are pushing real
activity forward at a rapid clip, increasing pressure on an already strained labor market. With longer-run infation
expectations well anchored, the tightening labor market is likely to drive infation to, and then past, our 2-percent
longer-run objective. In this setting it is appropriate that we continue to move toward a neutral policy stance while
remaining cognizant of potential shifts in fnancial-market conditions and infation pressures. The longer that we
maintain growth above potential, the more diÿcult it will be to achieve a smooth transition to sustainable growth
with stable, on-target infation. Over the medium and longer runs, I continue to be concerned about eroding
demographic trends, education and skill levels that are not keeping pace with business needs and are contributing
to sluggish productivity growth, and the likely unsustainable path of U.S. government debt relative to GDP.

Respondent 2: My outlook consists of above trend growth for the next two years before converging to trend
in 2020. The recent tax reform and an increase in federal discretionary spending are the primary drivers of the
overshoot of potential. The change in the tax code accelerates capital investment plans, pulling some investment
spending forward into the latter half of this year and 2019. However, it is my judgment that the tax reform will
only lead to modest changes in output growth.
The risks to my growth outlook are roughly balanced. Uncertainty has grown markedly following changes in
U.S. trade policy and frms could pull back on plans by more than I currently marked in. On the other hand, this
uncertainty could abate quickly and the recently enacted fscal measures could have a much more transformative
e ect on growth than I currently expect.
By most estimates, measured infation appears to be running at or very close to target already. Given the
absence of slack in my projection, I see infation continuing at or modestly above the FOMC’s infation objective
through 2020.
The risks to my infation outlook are roughly balanced. Given high rates of resource utilization, we could see a
more pronounced infation response than a linear Phillips curve would suggest. However, after a prolonged period
of below target infation, infation expectations of frms and households may be anchored below mandate-consistent
levels.

Respondent 3: In conversations with senior business executives, I have heard very optimistic remarks on the
broad economic outlook and on the outlook for their own frms. I believe that this optimism will support abovetrend GDP growth this year and next. In addition, expansive fscal policy will continue to boost growth. While
the unemployment rate is now below its long run level, I do not expect infation to spike, as expectations appear
to be well anchored. Factors such as improved transparency of pricing, o shoring of production, and competition
from foreign sellers will make it diÿcult for many domestic frms to raise prices signifcantly in the near term.

Respondent 4: Core infation remains below target and the economy continues to add jobs with only modest
increases in wage growth. This reinforces my assessment that there continues to be some slack in the economy.

Respondent 5: Activity in the frst half of the year is expanding at a somewhat faster pace than what was
projected in March. The unemployment rate has already declined to a level that, according to the March median
SEP, was expected to be reached only by the end of the year. Support to demand appears to be fairly broad based,
with frms’ business investment now contributing more steadily to growth, and relative strength from net exports.
Given the state of the labor market, the underlying momentum, and the ongoing fscal stimulus, we expect growth
in the second half of the year to outstrip potential by a full percentage point. With monetary policy tightening,
the pace of growth is expected to slow down in 2019, and to eventually fall below potential in 2020, when the
e ects of monetary policy take hold more fully. We expect the unemployment rate to drop this year to 3.6 percent,
and to 3.4 percent by the end of 2019. This level is roughly 1 1/4 percentage point below our assessment of the
equilibrium unemployment rate, which stands at 4.7 percent. With the unemployment rate projected to stay below
its equilibrium level over the forecast horizon, infation is expected to increase modestly above 2 percent.

Authorized for Public Release

Page 24 of 38

SEP: Compilation and Summary of Individual Economic Projections

June 12–13, 2018

Given the economy’s momentum, monetary policy needs to become restrictive to raise the unemployment
rate to a level consistent with full employment. The current forecast is conditioned on increases in the federal
funds rate that by the end of the forecast horizon steer policy to a stance that is only moderately restrictive. By
historical standards, this is a cautious pace of policy tightening given that the unemployment rate is already below
its estimated equilibrium level. Such an approach tries to strike a balance between the risks associated with an even
more gradual increase in rates, and the risk that faster policy tightening may increase the probability of the economy
falling into a recession. It is nevertheless important to recognize that the past does not provide much guidance in
terms of how to conduct policy so as to achieve a soft landing when the economy is beyond full employment.
We view the risks around the GDP growth outlook as roughly balanced in the near term. We take a fairly
conservative view of the e ect of the Tax Cuts and Jobs Act on GDP growth, and it is possible that the tax cuts
will stimulate activity by more than what we are currently expecting, for example via business sentiment e ects
that are outside of our forecasting model. Recent events highlight the risk that concerns about Italy’s solvency and
continued membership in the euro area may trigger a confdence crisis with widespread adverse spillovers to the
rest of the world. Such a development could have even more dire consequences if coupled with a loss of confdence
in Deutsche Bank, whose ongoing troubles pose a threat to fnancial stability. In the medium term, the ability
to achieve a soft landing remains questionable, and a scenario such as the one outlined in the current Tealbook
(“A Strong but Precarious Projection”) in which the economy eventually falls into a recession as monetary policy
tries to move the unemployment rate back up to its natural level would have several historical precedents. The
probability of such a scenario would be even higher if in the presence of persistently tight labor market conditions
infation reacts more forcefully, thus eliciting a stronger monetary policy response. Still, in the near term we view
the risks to infation as fairly balanced, as a countervailing risk to a nonlinear infation response may be given by
an equilibrium unemployment rate that is lower than what we are currently estimating.

Respondent 6: The economy continues to expand at a solid pace relative to trend, which has pushed the
unemployment rate lower. As in my March SEP, I have factored in a sizable amount of fscal stimulus to the
economic outlook. Going forward, ongoing strength in households disposable income coupled with past gains in
household wealth should support continued consumption growth. The outlook for fxed business investment also
appears strong given the tax changes and continued optimism. However, there is uncertainty regarding the impact
of rising oil prices, an appreciating U.S. dollar, and possible retaliatory tari s from U.S. trading partners
In this environment, I expect the economic expansion to proceed at a pace that is well above potential. With
considerable fscal stimulus and some monetary accommodation still in place, I expect these gaps to overshoot for
the next few years, leading to a further pickup in infation. I continue to expect infation to reach our 2 percent
target by 2019, and to overshoot slightly through 2020. Normalization of monetary policy and a tightening of
fscal policy will help bring infation, growth, and unemployment back to their long-run sustainable levels by the
following years.
Respondent 7: My forecast calls for above-trend growth of 2.8 percent in 2018, edging down to 2 percent in
2020. My near-term forecast is slightly higher than in March based on the strength of incoming data and anticipated
e ects on demand from fscal stimulus. However, my uncertainty about the demand e ects from fscal stimulus
remains high, especially given the high level of resource utilization in the economy. As well, uncertainty about
trade policy and the potential for escalating trade frictions with our trading partners is elevated. I expect the
unemployment rate to remain below my estimate of the natural rate over the forecast horizon as output grows at a
healthy pace and the labor force participation rate path fattens. My forecast for the unemployment rate is slightly
lower over the forecast horizon compared to March largely because of strong incoming data on the labor market.
I anticipate that infation will run modestly above the Committee’s target in 2019 and 2020. With above-trend
output growth, low unemployment, and slightly above-target infation over the forecast horizon I anticipate a
gradual increase in the federal funds to a level in 2020 that is slightly above my longer-run projection.

Respondent 8: The fundamentals underlying private domestic fnal demand are strong. Accommodative
monetary and fscal policy, a robust labor market, and improved balance sheets support strong gains in consumer
spending and investment. Although recent indicators of international growth are mixed, we continue to see healthy
foreign demand as another plus for the outlook. We also expect tax cuts and higher government spending to boost
growth in 2018 by close to 1 percent. The gradual removal of monetary accommodation and a smaller impulse from
fscal policy are projected to bring GDP growth down in 2019 and 2020. (We assume the fscal impulse is only a
tenth or two in 2020.) On the supply side, we assume that robust capital spending, due in part to the tax bill, will

Authorized for Public Release

Page 25 of 38

SEP: Compilation and Summary of Individual Economic Projections

June 12–13, 2018

boost potential growth a bit over the forecast period. Our assumptions regarding fscal policy are unchanged and
our forecast does not incorporate any changes in trade or immigration policy. In sum, we project growth will run
more than a full percentage point above potential in 2018, a little less than 1/2 percentage point above in 2019, and
then slow to modestly below potential in 2020.
We think the natural rate of unemployment is currently 4.4 percent and that it will fall to its long-run level of
4.3 percent by 2019. We expect the actual unemployment rate to move down to 3.3 percent in 2019 and then rise
to 3.5 percent in 2020, leaving a 0.8 percentage point gap from the natural rate we expect to prevail at that time.
Although we have some tentative indications that the trend in infation may be frming, relatively low readings
on key measures of infation expectations suggest that underlying infation is likely still below 2 percent. Various
features of our forecast will help boost this trend closer to target. With unemployment forecast to undershoot the
natural rate substantially, resource pressures should provide a notable lift to infation going forward. We also rely
on a shallow path for policy normalization and a strongly communicated commitment to a symmetric 2 percent
infation target to solidify infation expectations around our 2 percent infation objective. A non-accelerationist
Philipps curve limits the upside risk to infation, even with the unemployment rate a little below 3 1/2 percent. All
told, we see infation reaching 2.0 percent this year, remaining at that level in 2019, and then modestly overshooting
our objective in 2020.
The key factors shaping uncertainty and the risks to the forecasts were discussed earlier in the risks and
uncertainty sections.

Respondent 9: I believe that the economy has considerable momentum, helped along by expansionary fscal
policy. Strong growth will push down the unemployment rate, but by a fairly modest amount as workers are drawn
into the workforce, increasing labor force participation. The bu ering e ect of higher potential growth, both in
response to policy changes as well as increased investment and labor force participation, will limit the spillover of
growth into infation.

Respondent 10: The fundamentals supporting the expansion remain favorable, including accommodative
fnancial conditions, household balance sheets that have improved greatly since the recession, strong labor market
conditions, and accommodative monetary and fscal policy. Oil prices have risen, but remain relatively low and
the economy is less sensitive to oil prices than in the past. The tax changes imply higher disposable personal
income and after-tax corporate profts, which should lead to somewhat higher spending over the forecast horizon.
The budget package will expand federal government spending, although the timing is uncertain. Consumer and
business sentiment remain positive. Consistent with the data, business contacts report ongoing tightness in labor
markets, more widespread diÿculties in fnding qualifed workers, and the increasing need to raise wages in order
to retain workers across a range of skill groups and occupations. The global outlook remains positive, although
risks to the euro area have risen.
I project above-trend growth and that labor market strength will continue, moving the economy further beyond
maximum employment.
Incoming data indicate that infation is frming and anecdotal reports indicate frms have increasing pricing
power to pass along higher input costs to their customers. Infation is near our goal and I expect infation to
be sustainably at 2 percent by year end and to remain at that level through the forecast horizon, based on my
projection that growth will be above trend, labor markets will continue to strengthen, and infation expectations
will continue to be well-anchored.
I view overall uncertainty as roughly comparable to the historical norms of the last 20 years. As described
above, while there are a number of risks to my outlook, I view them as broadly balanced for both the real economy
and infation, but this is contingent on an upward policy rate path.
Respondent 11: The main factors shaping my economic outlook include an increasingly strong labor market,
still-supportive domestic fnancial conditions, growth abroad, accommodative domestic fscal policy, and more
data suggesting that infation will move to around 2 percent on a sustained basis.

Respondent 12: Our forecast continues to use a regime-based conception of outcomes for the US economy.
In our conception, there are multiple regimes and we appear to have nearly converged to one of them. The current
regime is viewed as persistent, and we see no reason to forecast an exit from the current regime over the forecast
horizon. We are, however, paying close attention to many factors that might precipitate a regime change, such

Authorized for Public Release

Page 26 of 38

SEP: Compilation and Summary of Individual Economic Projections

June 12–13, 2018

as a change in tax policy that might move the economy to a high productivity state. Monetary policy is regimedependent and can be viewed as optimal given the current regime. Longer term, the economy may visit other
regimes, such as ones associated with the previously mentioned higher productivity growth, a higher real return
to short-term government debt, or recession. If the economy transitions to any of these states, all variables may
be a ected and, in particular, the optimal regime-dependent policy may require adjustment, However, predicted
when these transitions may occur is very challenging, so we forecast that the economy will remain in the current
regime over the forecast horizon.

Respondent 13: Fiscal policy is a key factor in my outlook, providing a boost to aggregate demand this year
and next. With the unemployment rate already signifcantly below my estimate of its longer-run value, it will be
appropriate to raise the federal funds rate over the next several years, to a level that exceeds that in the longer-run.
These competing factors net out to above-trend GDP growth this year and next, and the unemployment rate
drops to 3.3 percent next year. With fscal impetus fading and interest rates rising still further, GDP growth
drops below potential in 2020 and the unemployment rate edges up. Infation moves up in my outlook to a pace
that slightly exceeds the Committee’s objective. In my projection, an important factor boosting infation is the
FOMC’s patience in raising interest rates. Patience in the face of low unemployment and infation that is close to
the Committee’s objective will help re-anchor trend infation at target.
Respondent 14: The recent expenditure data indicate a stronger rebound of growth in Q2 than had been
previously anticipated, with our projection for real GDP growth now around 4 percent (annual rate). Consequently,
the real GDP growth rate for 2018H1 now looks to be about 3 percent, which is about the same as that over 2017H2
and about 1/2 percentage point above our projection in the March SEP. We view some of the Q2 strength to be
transitory, refecting the unwinding of factors that held down growth at the beginning of the year. As in the March
SEP, we expect growth to remain near 3 percent over 2018H2, so that the 2018 Q4/Q4 growth rate is 3.0 percent,
up from 2.6 percent in March. We expect growth to slow to around 2 1/2 percent in 2019, and then slow further to
2 percent in 2020, due to ongoing tightening of fnancial conditions and fading of fscal stimulus.
Even though we have marked up our projection, the pickup in growth in 2018 is generally consistent with the
narrative of the U.S. economy that we have had for the past few SEP rounds. After a soft patch from mid-2015 to
early-2016, the economy has regained its footing and is now in a strong cyclical position. Household balance sheets
appear to be in the best shape in years, and indices of consumer confdence are at high levels. Housing starts per
capita remain below their long-run average and home prices continue to increase, suggesting that housing could
provide a positive growth impulse for some time, although supply constraints could limit that impulse over the
short term. Businesses appear to have begun to ramp up investment spending, with new orders for nondefense
capital goods ex-aircraft trending higher. Global demand remains solid, supporting U.S. exports. Furthermore, a
substantial amount of fscal stimulus has been added through the Tax Cut and Jobs Act of 2017 and the Bipartisan
Budget Act of 2018: These changes are expected to reduce the primary budget balance by 0.3 and 0.4 percent of
GDP in 2018 and 2019, respectively, according to the CBO.
With growth above our estimate of its potential rate over the entire forecast horizon, we see the unemployment
rate trending lower, averaging 3.6 percent in 2018Q4 and 3.4 percent in 2019Q4. It is expected to remain near 3
1/2 percent in 2020. Our projected decline of the unemployment rate is dampened by anticipated modest increases
in productivity growth and in the labor force participation rate. The growth rate of compensation per hour is
projected to trend higher over the forecast horizon, with the quarterly change exceeding 4 percent by 2019Q4. The
projected increase in compensation growth surpasses that of productivity growth, resulting in a gradual upward
trend in the rate of growth of unit labor costs. This in turn leads to a gradual upward trend in the labor share of
national income.
As in the March SEP, infation is projected to overshoot the FOMC’s 2 percent objective, with the core PCE
infation at 2.1 percent in 2018 (Q4/Q4) and 2.3 percent in 2019 and 2020. Near-term overall PCE infation is
somewhat higher than core infation because of the rise of energy prices, but it is expected to be at a similar rate
over the medium term. Nevertheless, we anticipate that infation expectations will remain at levels consistent with
the FOMC’s longer-run objective.
Respondent 15: Central economic outlook: My forecast for real GDP growth is characterized by above-trend
growth from 2018 to 2020, where fscal policy is the main factor boosting growth above trend. With the economy
already beyond full capacity, the growth forecast indicates that the gap between real GDP and its potential level

Authorized for Public Release

Page 27 of 38

SEP: Compilation and Summary of Individual Economic Projections

June 12–13, 2018

will widen over the forecast period. I expect headline and core infation to rise above 2 percent over the forecast
horizon, refecting accommodative monetary policy and real GDP above potential.
Uncertainty and risks: I view uncertainty surrounding my projections as broadly similar to levels of uncertainty
over the past 20 years, considering the magnitude of historical projection errors and current economic and policy
uncertainty at home and abroad. The risks to economic growth, infation, and unemployment appear broadly balanced. On the downside, possible changes in government policies, including the risk of escalating trade restrictions
and tighter immigration policies, could harm economic growth. Softer data in Europe along with renewed political
concerns there also pose downside risk to economic growth. Furthermore, as monetary policy becomes less accommodative and heads toward a restrictive policy stance, the combination of tightening fnancial conditions and
tightening labor market conditions is likely to make monetary policy-making more diÿcult, increasing the risk of a
policy error. In the past, periods of overheating have often led to higher infation and/or fnancial imbalances, and
ultimately recession. Upside risks to my forecast stem from greater-than-expected momentum in the economy and
the possibility that deregulation and elevated business confdence translate into sustained increases in investment
and productivity.

Authorized for Public Release

Page 28 of 38

SEP: Compilation and Summary of Individual Economic Projections

June 12–13, 2018

Forecast Narratives (continued)
Question 4(b). Please describe the key factors, potentially including
revisions to your assumptions about changes to government policies,
causing your forecasts to change since the previous SEP.
Respondent 1: Marginally stronger-than-expected incoming data have led me to revise my GDP growth
projections modestly upward in 2018 and 2019, and to revise my unemployment projections modestly downward.
With a somewhat tighter labor market, infation rises a little bit faster to a little bit higher level over the projections
horizon.
Respondent 2: The economic data released since the March meeting have led me to arithmetically adjust my
2018:H1 projection. However, I view much of the unexpected strength in the recent data as transitory, not as a
signal of an accelerated pace of growth.
I have marked down my path for the unemployment rate to incorporate its surprise decline over the last two
employment reports.
In response to a higher near-term trajectory of gasoline prices, I’ve marked up my 2018 headline PCE forecast.
However, the slope of oil futures would translate into a moderate decline in gasoline prices should historical
relationships hold. As such, I’ve marked down headline infation in 2019 by a tenth.

Respondent 3: My projection for GDP growth this year increased slightly, due to strong consumer spending
recently. And my projection for the PCEPI this year increased in order to refect the higher trajectory of gasoline
prices since the last SEP.

Respondent 4: Energy prices have moved up more than I had expected, causing me to move up my projections
for near-term infation.
Respondent 5: Revisions to the real outlook have been minor, and the infation outlook is essentially unchanged. These outcomes are achieved with less policy tightening in this forecast, as we are estimating a larger
response of economic activity to an increase in interest rates.

Respondent 6: My assumptions about the e ects of fscal stimulus on the economic outlook are unchanged
from the March SEP.
My infation projection is largely unchanged from September. I continue to expect infation to reach the 2
percent target by 2019 and modestly overshoot in 2020.

Respondent 7: I have revised down my unemployment rate path slightly and edged down my estimate of
longer-run unemployment compared to March – largely on the strength of incoming data. My forecast continues
to build in some fscal stimulus in 2018 and 2019, however I remain uncertain about its e ective magnitude.
Respondent 8: Our current forecast incorporates a revised estimate of the natural rate of unemployment that,
in addition to changes in the age and gender composition of the population over time, also accounts for changes in
skills as measured by completed years of education. As a result, our current estimates of the NAIRU are 0.2 – 0.3
percentage point lower over the forecast period, and our long-run normal unemployment rate is now 4.3 percent.
We also incorporated a revised estimate of potential GDP which takes into account the new NAIRU as well as the
usual range of factors that go into our regular growth accounting exercise; these boosted our numbers for potential
output a bit in 2018-2020, but left our long-run growth assumption unchanged at 1.8 percent.
On net, our GDP growth forecast is little changed compared to March. Our projections of the GDP gap and the
gap between the unemployment rate and the natural rate are 0.1 to 0.2 percentage points smaller over the forecast
period.
The incoming data and anecdotal reports from our business contacts point to a bit frmer infation trend.
Accordingly, we raised our forecast for core CPE infation by 0.2 percentage point in 2018 and 0.1 percentage point
in 2019. In response, we made monetary policy slightly less accommodative (moving forward a rate increase into
2019). This forecast continues to generate modest overshooting of infation in 2020.

Authorized for Public Release

Page 29 of 38

SEP: Compilation and Summary of Individual Economic Projections

June 12–13, 2018

Respondent 9: My outlook is little changed. I have lowered my near-term unemployment forecast in response
to the incoming data. I have boosted near-term headline infation to incorporate the recent run up in oil prices.
Respondent 10: The narrative of my forecast is similar to that in March. Economic fundamentals remain
healthy and fscal policy will add to growth over the forecast horizon. Refecting incoming data, I have edged up
my growth and infation forecasts and edged down my unemployment rate forecast over the projection horizon. I
expect growth to be above trend, the unemployment rate to be below its longer run level over the forecast horizon,
and infation to be sustainably at 2 percent by the end of this year and over the rest of the forecast horizon.
Given current conditions, the medium run outlook, and risks, I view an upward path of monetary policy as
appropriate and a prudent course that balances the risks. My funds rate path is slightly steeper than in my March
projection refecting the changes I’ve made to my growth, unemployment, and infation forecasts (consistent with
steeper paths seen across a number of monetary policy rules).
Respondent 11: My projection has not changed all that much since the previous SEP.
Respondent 12: Recent data has caused us to increase our projections for GDP growth for 2018 and 2019 and
decrease our projections for unemployment for 2018, 2019, and 2020.

Respondent 13: A key factor underlying my forecast revision has been the strong incoming data, especially
on the labor market. As a consequence of those incoming data, my projection for the unemployment rate at the
end of the year is now 0.2 percentage point lower than in March. That stronger outlook has led me to revise up my
estimate of the short-run neutral rate and as a consequence, my path for the federal funds rate is somewhat steeper
than in March.
Respondent 14: As noted earlier, the recent expenditure data indicate stronger growth over 2018H1 than we
anticipated in March; however, we see some of that strength as transitory and have not made substantial changes
to the medium-term projections. We assume no material e ect of the fscal stimulus on the potential growth rate.
Similarly, we currently see no material e ect of trade and immigration policies on the potential growth rate or other
longer-run variables.
Although greater prospects for more restrictive trade and immigration policies do not have a signifcant e ect
on our modal projections, they have increased our assessment of the uncertainty around the infation outlook as
noted in the response to question 2(a).
As noted in the response to question 2(b), we now see the infation risks as returning to a rough balance after
being modestly skewed to the upside in March. This shift refects the impact of the recent appreciation of the dollar
and continued soft global infation data on our risk assessment.

Respondent 15: I have made no signifcant changes to my forecast or underlying assumptions since March.

Authorized for Public Release

Page 30 of 38

SEP: Compilation and Summary of Individual Economic Projections

June 12–13, 2018

Forecast Narratives (continued)
Question 4(c). Please describe any important di erences, potentially
including those related to your assumptions about changes to government
policies, between your current economic forecast and the Tealbook.
Respondent 1: Despite a fed-funds-rate path that is less aggressive than that of the Tealbook, I see a bit
more of a deceleration in real activity in 2019 and 2020. In my submission, consequently, the unemployment rate
begins to turn up at the end of the projections horizon. Fading fscal stimulus contributes to the anticipated growth
slowdown.
My infation path is slightly higher than the Tealbook’s, principally because I’m not convinced that the longerterm infation expectations relevant to price setting are currently below our 2-percent infation objective.
Respondent 2: My baseline growth projection remains muted relative to the Tealbook baseline. I am continuing to mark in a smaller impact from tax reform on overall growth than the Tealbook, resulting in a lower
growth profle over the next two years. Much of the divergence between my path for the unemployment rate and
the projection marked into the Tealbook owes to di erences in our employment growth projections over the next
several years.
Respondent 3: In both the Tealbook and this submission, real GDP growth is near trend in 2020; however,
my estimate of trend is a quarter point higher than the Tealbook’s, due to my higher forecast for labor productivity.
That di erence also leads my unemployment path to be higher than in the Tealbook.

Respondent 4: Relative to the Tealbook, my forecast for economic activity is a bit stronger, but my forecast
for infation is broadly similar. I believe the long-run unemployment rate is lower and the improving labor market
will continue to keep the labor force participation rate from falling, minimizing the downward e ects of healthy job
growth on the unemployment rate. I believe that it is appropriate for the federal funds rate to rise more gradually
than in the Tealbook. Even with lower rates, my projection anticipates that infation will return to target at about
the same time as the Tealbook.

Respondent 5: We view our forecast as qualitatively similar to the Tealbook. In both forecasts monetary
policy needs to tighten noticeably more than what fnancial markets are currently expecting for the unemployment
rate to revert back to a level consistent with full employment. Our outlook features a path for the federal funds rate
which is somewhat less steep, consistent with empirical evidence suggesting that a monetary policy tightening has
a greater impact on economic activity than a monetary policy easing of the same magnitude.

Respondent 6: The two projections are largely in alignment, with the exception of the anticipated path for
the federal funds rate.
In both, the waning e ects of the fscal stimulus and the gradual removal of monetary policy accommodation
slow growth closer to potential by the end of 2019. Finally, the persistent overshooting of full employment pushes
infation back to 2 percent by 2019 and results in a slight overshooting of infation for some time afterwards.
The Tealbook projects a slightly more protracted overshooting of full employment, with the unemployment rate
declining to 3.4 percent at the end of 2020. In my projection, the unemployment rate bottoms out at 3.5 percent by
the middle of 2019. My projection for the funds rate path shows a more gradual rise and less overshooting relative
to the funds rate path in the Tealbook.

Respondent 7: My path for appropriate monetary policy remains considerably more accommodative than
the Tealbook over the forecast horizon.

Respondent 8: Our federal funds rate path is noticeably below the Tealbook over the next three years, ending
2020 at 3.25 percent. We assess the long-run neutral funds rate to be 2.75 percent, so we do not overshoot the
long-run fed funds rate by nearly as much as the Tealbook does.
Our projection for Q4-to-Q4 GDP growth in 2018 is 2 tenths higher than that of the Tealbook, but very similar
in 2019 and 2020. Our forecast is based on a touch smaller but more front-loaded impulse from tax cuts and

Authorized for Public Release

Page 31 of 38

SEP: Compilation and Summary of Individual Economic Projections

June 12–13, 2018

government spending, and a shallower path for the funds rate. We continue to view the current output gap to
be narrower than the Tealbook so that by the end of 2020 it remains about 1 percentage point smaller than the
Tealbook’s. Our projection for the unemployment rate is similar to the Tealbook’s, although we see unemployment
rising slightly (albeit to a level still well below the natural rate) by the end of the projection period. Our revised
estimates of the natural rate of unemployment are three to four tenths lower than the Tealbook estimates. As
a result, our 3.5 percent unemployment rate projection for 2020:Q4 undershoots the natural rate by about 0.5
percentage point less than in the Tealbook.
Our forecast for infation is very similar to the Tealbook’s, although it is conditioned on a more accommodative
monetary policy path.

Respondent 9: I have a stronger outlook for potential growth than the Tealbook. Consequently, I believe that
the economy can grow faster in the near-term than projected in the Tealbook without much additional upward
impetus to price infation. My more optimistic outlook for potential growth is consistent with a slightly higher
long-run neutral interest rate compared to that in the Sta outlook.
Respondent 10: As in the Tealbook forecast, I expect that the economy will grow at an above-trend pace,
labor market conditions will continue to strengthen, and infation will remain near our 2 percent goal over the
forecast horizon. The Tealbook has revised its unemployment rate path up and its infation forecast down since
March, so the Tealbook and my forecast are now quantitatively similar along many dimensions. However, to get
these similar outcomes, the Tealbook has a steeper funds rate path, especially in 2020. By the end of the forecast
horizon, the Tealbook policy path is about 90 basis points higher than mine. Thus, the Tealbook sees a slightly
stronger underlying economy that needs to be tempered by more restrictive monetary policy compared to my
projection.
Respondent 11: My projections for GDP growth, the unemployment rate, and infation are broadly consistent
with the Tealbook. I have slightly stronger growth and a slightly higher path for infation. My path for the target
federal funds rate is substantially lower than the Tealbook path.

Respondent 12: For GDP growth and infation, our projections are similar to those in the Tealbook. Di erences arise with respect to monetary policy implications because the Tealbook projections incorporate the idea
of a longer-run steady state to which the economy is converging. Monetary policy has to be set appropriately as
the economy transitions to the longer-run steady state. This tends to imply an upward-sloping policy rate path.
Our regime conception, in contrast, views monetary policy as regime-dependent and the current regime is viewed
as persistent. It is acknowledged that the economy may visit other regimes in the future, but switches to these
regime are diÿcult to forecast. This suggests a fat path for the policy rate over the forecast horizon relative to
that contained in the Tealbook. The Tealbook also has a substantial undershooting of the unemployment rate, far
more than our undershooting, before returning to its longer-run value of 4.7 percent.
Respondent 13: N/A
Respondent 14: Our growth projections are fairly similar to those in the Tealbook (and in the Tealbook
update), but there are larger di erences between the Tealbook forecast and our projections for the other SEP
variables.
Although the unemployment rate paths in our projection and in the Tealbook are essentially the same, the
Tealbook features a larger undershooting of the unemployment rate, as its estimate of the longer-run normal
unemployment rate, at 4.7 percent is 0.4 percentage point above our estimate. This larger undershooting of
unemployment is the counterpart of a sizable positive output gap that arises in the Tealbook forecast.
One other di erence in the labor market projections concerns the paths for labor force participation. In our
projection, the participation rate rises gradually to just above 63 percent in 2019, while in the Tealbook this rate
is steady at 62.7 percent at end-2019. This di erence refects our assumption of some positive cyclical e ects on
participation.
For infation, the two forecasts continue to di er, as they did in March. We see core PCE infation rising to 2.1
percent in 2018 and further to 2.3 percent in 2019-2020, before returning to objective early in the next decade. The
Tealbook projects infation still below target in 2018 and mildly overshooting in 2020: core infation is projected at

Authorized for Public Release

Page 32 of 38

SEP: Compilation and Summary of Individual Economic Projections

June 12–13, 2018

2.1 percent, despite a larger undershooting of unemployment than in our projection. The considerable persistence
of infation and the fat Phillips curve in the Tealbook appear to require a prolonged period of above-potential
growth in order to induce infation to rise toward the longer-run infation goal. The overshoot of infation in our
projection helps to ensure that infation expectations do not fall below levels consistent with the FOMC’s longer-run
objective.
In terms of the uncertainty and risk assessment, both projections see uncertainty at near normal levels and
risks to real growth and infation as broadly balanced.
Finally, our monetary policy path is below the Tealbook path for 2018 – 20. In addition, our assumption for
the longer-run normal policy rate is 50 basis points above that of the Tealbook, which is unchanged at 2.50 percent.
Both policy paths have an overshooting of the longer-run FFR in 2019 – 20, although the Tealbook’s is appreciably
larger, which is a refection of the larger projected positive output gap in the Tealbook forecast.

Respondent 15: My assumptions and projections are similar to those in the Tealbook.

Authorized for Public Release

Page 33 of 38

SEP: Compilation and Summary of Individual Economic Projections

June 12–13, 2018

Figure 3.A. Distribution of participants’ projections for the change in real GDP, 2018–20 and over the longer run
Number of participants

2018

June and March
Tealbook

June projections
March projections

1.4 1.5

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

18
16
14
12
10
8
6
4
2
3.0 3.1

Percent range
Number of participants

2019

1.4 1.5

1.6 1.7

1.8 1.9

2.0 2.1

June
Tealbook

March
Tealbook

2.4 2.5

2.6 2.7

2.2 2.3

18
16
14
12
10
8
6
4
2
2.8 2.9

3.0 3.1

Percent range
Number of participants

2020

1.4 1.5

1.6 1.7

June
Tealbook

March
Tealbook

1.8 1.9

2.0 2.1

18
16
14
12
10
8
6
4
2
2.2 2.3

2.4 2.5

2.6 2.7

2.8 2.9

3.0 3.1

Percent range
Number of participants

Longer run
18
16
14
12
10
8
6
4
2

June and March
Tealbook

1.4 1.5

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

Percent range

Note: Updated June Tealbook values are reported. Definitions of variables and other explanations are in the notes
to table 1.

Authorized for Public Release

Page 34 of 38

SEP: Compilation and Summary of Individual Economic Projections

June 12–13, 2018

Figure 3.B. Distribution of participants’ projections for the unemployment rate, 2018–20 and over the longer run
Number of participants

2018
June projections
March projections

18
16
14
12
10
8
6
4
2

June
Tealbook

March
Tealbook

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

4.4 4.5

4.6 4.7

4.8 4.9

5.0 5.1

Percent range
Number of participants

2019

3.0 3.1

18
16
14
12
10
8
6
4
2

June
Tealbook

March
Tealbook

3.2 3.3

3.4 3.5

3.6 3.7

3.8 3.9

4.0 4.1

4.2 4.3

4.4 4.5

4.6 4.7

4.8 4.9

5.0 5.1

Percent range
Number of participants

2020

June
Tealbook

March
Tealbook

3.0 3.1

3.2 3.3

3.4 3.5

18
16
14
12
10
8
6
4
2
3.6 3.7

3.8 3.9

4.0 4.1

4.2 4.3

4.4 4.5

4.6 4.7

4.8 4.9

5.0 5.1

Percent range
Number of participants

Longer run

3.0 3.1

June and March
Tealbook

3.2 3.3

3.4 3.5

3.6 3.7

3.8 3.9

4.0 4.1

4.2 4.3

4.4 4.5

4.6 4.7

18
16
14
12
10
8
6
4
2
4.8 4.9

5.0 5.1

Percent range

Note: Updated June Tealbook values are reported. Definitions of variables and other explanations are in the notes
to table 1.

Authorized for Public Release

Page 35 of 38

SEP: Compilation and Summary of Individual Economic Projections

June 12–13, 2018

Figure 3.C. Distribution of participants’ projections for PCE inflation, 2018–20 and over the longer run
Number of participants

2018

March
Tealbook

June
Tealbook

1.7 1.8

1.9 2.0

June projections
March projections

2.1 2.2

18
16
14
12
10
8
6
4
2

2.3 2.4

Percent range
Number of participants

2019

June and March
Tealbook

1.7 1.8

18
16
14
12
10
8
6
4
2

1.9 2.0

2.1 2.2

2.3 2.4

Percent range
Number of participants

2020

1.7 1.8

June
Tealbook

March
Tealbook

1.9 2.0

2.1 2.2

18
16
14
12
10
8
6
4
2
2.3 2.4

Percent range
Number of participants

Longer run

June and March
Tealbook

1.7 1.8

18
16
14
12
10
8
6
4
2

1.9 2.0

2.1 2.2

2.3 2.4

Percent range

Note: Updated June Tealbook values are reported. Definitions of variables and other explanations are in the notes
to table 1.

Authorized for Public Release

Page 36 of 38

SEP: Compilation and Summary of Individual Economic Projections

June 12–13, 2018

Figure 3.D. Distribution of participants’ projections for core PCE inflation, 2018–20
Number of participants

2018
June and March
Tealbook

June projections
March projections

18
16
14
12
10
8
6
4
2

1.7 1.8

1.9 2.0

2.1 2.2

2.3 2.4

Percent range
Number of participants

2019
June
Tealbook

March
Tealbook

18
16
14
12
10
8
6
4
2

1.7 1.8

1.9 2.0

2.1 2.2

2.3 2.4

Percent range
Number of participants

2020
June and March
Tealbook

18
16
14
12
10
8
6
4
2

1.7 1.8

1.9 2.0

2.1 2.2

2.3 2.4

Percent range

Note: Updated June Tealbook values are reported. Definitions of variables and other explanations are in the notes
to table 1.

Authorized for Public Release

Page 37 of 38

SEP: Compilation and Summary of Individual Economic Projections

June 12–13, 2018

Figure 3.E. Distribution of participants’ judgments of the midpoint of the appropriate target range for the federal funds
rate or the appropriate target level for the federal funds rate, 2018–20 and over the longer run
Number of participants

2018

June
Tealbook

June projections
March projections

March
Tealbook

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

18
16
14
12
10
8
6
4
2

4.63 4.87

4.88 5.12

Percent range
Number of participants

2019

June
Tealbook
18
16
14
12
10
8
6
4
2

March
Tealbook

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

4.63 4.87

4.88 5.12

Percent range
Number of participants

2020

June
Tealbook

March
Tealbook
18
16
14
12
10
8
6
4
2

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

4.63 4.87

4.88 5.12

Percent range
Number of participants

Longer run
June and March
Tealbook

1.63 1.87

1.88 2.12

2.13 2.37

2.38 2.62

2.63 2.87

18
16
14
12
10
8
6
4
2
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

4.63 4.87

4.88 5.12

Percent range

Note: Updated June Tealbook values are reported. Definitions of variables and other explanations are in the notes
to table 1.

Authorized for Public Release

Page 38 of 38