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Minutes of the Federal Open Market Committee
June 12–13, 2018
A joint meeting of the Federal Open Market Committee
and the Board of Governors was held in the offices of
the Board of Governors of the Federal Reserve System
in Washington, D.C., on Tuesday, June 12, 2018, at
1:00 p.m. and continued on Wednesday, June 13, 2018,
at 9:00 a.m. 1
PRESENT:
Jerome H. Powell, Chairman
William C. Dudley, Vice Chairman
Thomas I. Barkin
Raphael W. Bostic
Lael Brainard
Loretta J. Mester
Randal K. Quarles
John C. Williams
James Bullard, Charles L. Evans, Esther L. George,
Eric Rosengren, and Michael Strine, 2 Alternate
Members of the Federal Open Market Committee
Patrick Harker, Robert S. Kaplan, and Neel Kashkari,
Presidents of the Federal Reserve Banks of
Philadelphia, Dallas, and Minneapolis, respectively
James A. Clouse, Secretary
Matthew M. Luecke, Deputy Secretary
David W. Skidmore, Assistant Secretary
Michelle A. Smith, Assistant Secretary
Mark E. Van Der Weide, General Counsel
Michael Held, Deputy General Counsel
Steven B. Kamin, Economist
Thomas Laubach, Economist
David W. Wilcox, Economist
David Altig, Kartik B. Athreya, Thomas A. Connors,
David E. Lebow, Trevor A. Reeve, Ellis W.
Tallman, William Wascher,2 and Beth Anne
Wilson, Associate Economists
Simon Potter, Manager, System Open Market Account

Ann E. Misback, Secretary, Office of the Secretary,
Board of Governors
Matthew J. Eichner, 3 Director, Division of Reserve
Bank Operations and Payment Systems, Board of
Governors; Michael S. Gibson, Director, Division
of Supervision and Regulation, Board of
Governors; Andreas Lehnert, Director, Division of
Financial Stability, Board of Governors
Rochelle M. Edge, Deputy Director, Division of
Monetary Affairs, Board of Governors; Michael T.
Kiley, Deputy Director, Division of Financial
Stability, Board of Governors
Antulio N. Bomfim, Special Adviser to the Chairman,
Office of Board Members, Board of Governors
Joseph W. Gruber and John M. Roberts, Special
Advisers to the Board, Office of Board Members,
Board of Governors
Linda Robertson, Assistant to the Board, Office of
Board Members, Board of Governors
Shaghil Ahmed, Senior Associate Director, Division of
International Finance, Board of Governors
Ellen E. Meade, Stephen A. Meyer, and Robert J.
Tetlow, Senior Advisers, Division of Monetary
Affairs, Board of Governors
John J. Stevens and Stacey Tevlin, Associate Directors,
Division of Research and Statistics, Board of
Governors
Jeffrey D. Walker,3 Deputy Associate Director,
Division of Reserve Bank Operations and Payment
Systems, Board of Governors; Min Wei, Deputy
Associate Director, Division of Monetary Affairs,
Board of Governors

Lorie K. Logan, Deputy Manager, System Open
Market Account
1 The Federal Open Market Committee is referenced as the
“FOMC” and the “Committee” in these minutes.
2 Attended Tuesday session only.

Attended through the discussion of developments in financial markets and open market operations.

3

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Burcu Duygan-Bump, Norman J. Morin, John
Sabelhaus, and Paul A. Smith, Assistant Directors,
Division of Research and Statistics, Board of
Governors; Christopher J. Gust, Assistant
Director, Division of Monetary Affairs, Board of
Governors
Penelope A. Beattie,2 Assistant to the Secretary, Office
of the Secretary, Board of Governors
John Ammer,2 Senior Economic Project Manager,
Division of International Finance, Board of
Governors
Dan Li, Section Chief, Division of Monetary Affairs,
Board of Governors
David H. Small, Project Manager, Division of
Monetary Affairs, Board of Governors
Martin Bodenstein and Marcel A. Priebsch, Principal
Economists, Division of Monetary Affairs, Board
of Governors; Logan T. Lewis, Principal
Economist, Division of International Finance,
Board of Governors; Maria Otoo, Principal
Economist, Division of Research and Statistics,
Board of Governors
Marcelo Ochoa, Senior Economist, Division of
Monetary Affairs, Board of Governors
Achilles Sangster II, Information Management Analyst,
Division of Monetary Affairs, Board of Governors
Kenneth C. Montgomery, First Vice President, Federal
Reserve Bank of Boston
Jeff Fuhrer, Daniel G. Sullivan, and Christopher J.
Waller, Executive Vice Presidents, Federal Reserve
Banks of Boston, Chicago, and St. Louis,
respectively
Marc Giannoni, Paolo A. Pesenti, and Mark L.J.
Wright, Senior Vice Presidents, Federal Reserve
Banks of Dallas, New York, and Minneapolis,
respectively
Roc Armenter, Vice President, Federal Reserve Bank of
Philadelphia
Willem Van Zandweghe, Assistant Vice President,
Federal Reserve Bank of Kansas City

Nicolas Petrosky-Nadeau, Senior Research Advisor,
Federal Reserve Bank of San Francisco
Developments in Financial Markets and Open Market Operations
The manager of the System Open Market Account
(SOMA) provided a summary of developments in domestic and global financial markets over the intermeeting period. Developments in emerging market economies (EMEs) and in Europe were the focus of considerable attention by financial market participants over recent weeks. Investor perceptions of increased economic
and political vulnerabilities in several EMEs led to a notable depreciation in EME currencies relative to the dollar. Market participants reported that an unwinding of
investor positions had been a factor amplifying these
currency moves. In Europe, concerns about the political
situation in Italy and its potential economic implications
prompted a significant widening in risk spreads on Italian sovereign securities. The share prices of Italian
banks and other banks that could be exposed to Italy
declined sharply. In domestic financial markets, expectations for the path of the federal funds rate were little
changed over the intermeeting period. The manager
noted that the release of the minutes of the May FOMC
meeting, and particularly the reference to a possible technical adjustment in the interest on excess reserves
(IOER) rate relative to the top of the FOMC’s target
range for the federal funds rate, prompted a small reduction in federal funds futures rates.
The deputy manager followed with a discussion of
money markets and open market operations. Rates on
Treasury repurchase agreements (repo) had remained elevated in recent weeks, apparently responding, in part,
to increased Treasury issuance over recent months. In
light of the firmness in repo rates, the volume of operations conducted through the Federal Reserve’s overnight reverse repurchase agreement facility remained
low. Elevated repo rates may also have contributed to
some upward pressure on the effective federal funds rate
in recent weeks as lenders in that market shifted some of
their investments to earn higher rates available in repo
markets. The deputy manager also discussed the current
outlook for reinvestment purchases of agency mortgagebacked securities (MBS). Based on current projections,
principal payments on the Federal Reserve’s holdings of
agency MBS would likely be lower than the monthly cap
on redemptions that will be in effect beginning in the fall
of this year. Consistent with the June 2017 addendum
to the Policy Normalization Principles and Plans, reinvestment purchases of agency MBS then are projected

Minutes of the Meeting of June 12–13, 2018
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to fall to zero from that point onward. However, principal payments on agency MBS are sensitive to changes
in various factors, particularly long-term interest rates.
As a result, agency MBS principal payments could rise
above the monthly redemption cap in some future scenarios and thus require MBS reinvestment purchases. In
light of this possibility, the deputy manager described
plans for the Desk to conduct small value purchases of
agency MBS on a regular basis in order to maintain operational readiness.
By unanimous vote, the Committee ratified the Open
Market Desk’s domestic transactions over the intermeeting period. There were no intervention operations in foreign currencies for the System's account during the intermeeting period.
Staff Review of the Economic Situation
The information reviewed for the June 12–13 meeting
indicated that labor market conditions continued to
strengthen in recent months, and that real gross domestic product (GDP) appeared to be rising at a solid rate in
the first half of the year. Consumer price inflation, as
measured by the 12-month percentage change in the
price index for personal consumption expenditures
(PCE), was 2 percent in April. Survey-based measures
of longer-run inflation expectations were little changed
on balance.
Total nonfarm payroll employment expanded at a strong
pace, on average, in April and May. The national unemployment rate edged down in both months and was
3.8 percent in May. The unemployment rates for African Americans, Asians, and Hispanics all declined, on
net, from March to May; the rate for African Americans
was the lowest on record but still noticeably above the
rates for other groups. The overall labor force participation rate edged down in April and May but was still at
about the same level as a year earlier. The share of workers employed part time for economic reasons was little
changed at a level close to that from just before the previous recession. The rate of private-sector job openings
rose in March and stayed at that elevated level in April;
the rate of quits edged up, on net, over those two
months; and initial claims for unemployment insurance
benefits continued to be low through early June. Recent
readings showed that increases in labor compensation
stepped up over the past year. Compensation per hour
in the nonfarm business sector increased 2.7 percent
over the four quarters ending in the first quarter of this
year (compared with 1.9 percent over the same four
quarters a year earlier), and average hourly earnings for
all employees increased 2.7 percent over the 12 months

ending in May (compared with 2.5 percent over the same
12 months a year earlier).
Total industrial production increased at a solid pace in
April, but the available indicators for May, particularly
production worker hours in manufacturing, indicated
that output declined in that month. Automakers’ schedules suggested that assemblies of light motor vehicles
would increase in the coming months, and broader indicators of manufacturing production, such as the new orders indexes from national and regional manufacturing
surveys, continued to point to solid gains in factory output in the near term.
Consumer spending appeared to be increasing briskly in
the second quarter after rising at only a modest pace in
the first quarter. Real PCE increased at a robust pace in
April after a strong gain in March. Although light motor
vehicle sales declined in May, indicators of vehicle demand generally remained upbeat. More broadly, recent
readings on key factors that influence consumer spending—including gains in employment, real disposable
personal income, and households’ net worth—continued to be supportive of solid real PCE growth in the
near term. In addition, the lower tax withholding resulting from the tax cuts enacted late last year still appeared
likely to provide some additional impetus to spending in
coming months. Consumer sentiment, as measured by
the University of Michigan Surveys of Consumers, remained elevated in May.
Residential investment appeared to be declining further
in the second quarter after decreasing in the first quarter.
Starts for new single-family homes were unchanged in
April from their first-quarter average, but starts of multifamily units declined noticeably. Sales of both new and
existing homes decreased in April.
Real private expenditures for business equipment and intellectual property appeared to be rising at a moderate
pace in the second quarter after a somewhat faster increase in the first quarter. Nominal shipments of nondefense capital goods excluding aircraft rose in April,
and forward-looking indicators of business equipment
spending—such as the backlog of unfilled capital goods
orders, along with upbeat readings on business sentiment from national and regional surveys—continued to
point to robust gains in equipment spending in the near
term. Real business expenditures for nonresidential
structures appeared to be expanding at a solid pace again
in the second quarter, and the number of crude oil and
natural gas rigs in operation—an indicator of business

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spending for structures in the drilling and mining sector—increased, on net, from mid-April through early
June.
Nominal federal government spending data for April
and May pointed to an increase in real federal purchases
in the second quarter. Real state and local government
purchases also appeared to be moving up; although
nominal construction expenditures by these governments edged down in April, their payrolls rose at a moderate pace, on net, in April and May.
Net exports made a negligible contribution to real GDP
growth in the first quarter, with growth of both real exports and real imports slowing from the brisk pace of
the fourth quarter of last year. After narrowing in
March, the nominal trade deficit narrowed further in
April, as exports continued to increase while imports declined slightly, which suggested that net exports might
add modestly to real GDP growth in the second quarter.
Total U.S. consumer prices, as measured by the PCE
price index, increased 2.0 percent over the 12 months
ending in April. Core PCE price inflation, which excludes changes in consumer food and energy prices, was
1.8 percent over that same period. The consumer price
index (CPI) rose 2.8 percent over the 12 months ending
in May, while core CPI inflation was 2.2 percent. Recent
readings on survey-based measures of longer-run inflation expectations—including those from the Michigan
survey, the Survey of Professional Forecasters, and the
Desk’s Survey of Primary Dealers and Survey of Market
Participants—were little changed on balance.
Incoming data suggested that foreign economic activity
continued to expand at a solid pace. Real GDP growth
picked up in the first quarter in several EMEs—including Mexico, China, and much of emerging Asia—although recent indicators pointed to some moderation in
the pace of activity in most EMEs. By contrast, in the
advanced foreign economies (AFEs), real GDP growth
slowed in the first quarter, owing partly to temporary
factors such as labor strikes in some European countries
and bad weather in Japan. More recent indicators
pointed to a partial rebound in AFE economic growth
in the second quarter. Inflation pressures in the foreign
economies generally remained subdued, even though
higher oil prices put some upward pressure on headline
inflation.
Staff Review of the Financial Situation
During the intermeeting period, global financial markets
were buffeted by increased concerns about the outlook
for foreign growth and political developments in Italy,

but these concerns subsequently eased. On net, Treasury yields were little changed despite significant intraperiod moves, and the dollar appreciated notably as a
range of AFE and EME currencies and sovereign bonds
came under pressure. However, broad domestic stock
price indexes increased, on net, as generally strong corporate earnings reports helped support prices. Meanwhile, financing conditions for nonfinancial businesses
and households remained supportive of economic activity on balance.
Over the intermeeting period, macroeconomic data releases signaling moderating growth in some foreign
economies, along with downside risks stemming from
political developments in Italy and several EMEs,
weighed on prices of foreign risk assets. These developments, together with a still-solid economic outlook for
the United States, supported an increase in the broad
trade-weighted index of the foreign exchange value of
the dollar.
The dollar appreciated notably against several EME currencies (primarily those of Argentina, Turkey, Mexico,
and Brazil), as the increase in U.S. interest rates since late
2017, along with political developments and other issues,
intensified concerns about financial vulnerabilities.
EME mutual funds saw slight net outflows, and, on balance, EME sovereign spreads widened and equity prices
edged lower. In the AFEs, sovereign spreads in some
peripheral European countries widened and European
bank shares came under pressure, as investors focused
on political developments in Italy. Broad equity indexes
in the euro area, with the exception of Italy, ended the
period little changed, while those in Canada, the United
Kingdom, and Japan edged higher. Market-based
measures of expected policy rates were little changed, on
balance, and flight-to-safety flows reportedly contributed to declines in German longer-term sovereign yields.
FOMC communications over the intermeeting period—
including the May FOMC statement and the May
FOMC meeting minutes—elicited only minor reactions
in asset markets. Quotes on federal funds futures contracts suggested that the probability of an increase in the
target range for the federal funds rate occurring at the
June FOMC meeting inched up further to near certainty.
Levels of the federal funds rate at the end of 2019 and
2020 implied by overnight index swap (OIS) rates were
little changed on net.
Longer-term nominal Treasury yields ended the period
largely unchanged despite notable movements during

Minutes of the Meeting of June 12–13, 2018
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the intermeeting period. Measures of inflation compensation derived from Treasury Inflation-Protected Securities were also little changed on net.
Broad U.S. equity price indexes increased about 5 percent, on net, since the May FOMC meeting, boosted in
part by the stronger-than-expected May Employment
Situation report. Stock prices also appeared to have
been buoyed by first-quarter earnings reports that generally beat expectations—particularly for the technology
sector, which outperformed the broader market. However, the turbulence abroad and, to a lesser degree,
mounting concerns about trade policy weighed on equity
prices at times. Option-implied volatility on the
S&P 500 at the one-month horizon—the VIX—was
down somewhat, on net, remaining just a couple of percentage points above the very low levels that prevailed
before early February. Over the intermeeting period,
spreads of yields on nonfinancial corporate bonds over
those of comparable-maturity Treasury securities widened moderately for both investment- and speculativegrade firms. However, these spreads remained low by
historical standards.
Over the intermeeting period, short-term funding markets stayed generally stable despite still-elevated spreads
between rates on some private money market instruments and OIS rates of similar maturity. While some of
the factors contributing to pressures in short-term funding markets had eased recently, the three-month spread
between the London interbank offered rate and the OIS
rate remained significantly wider than at the start of the
year.
Growth of outstanding commercial and industrial loans
held by banks appeared to have moderated in May after
a strong reading in April. The issuance of institutional
leveraged loans was strong in April and May; meanwhile,
corporate bond issuance was weak, likely reflecting seasonal patterns. Gross issuance of municipal bonds in
April and May was solid, as issuance continued to recover from the slow pace recorded at the start of the
year.
Financing conditions for commercial real estate (CRE)
remained accommodative. Even so, the growth of CRE
loans held by banks ticked down in April and May.
Commercial mortgage-backed securities (CMBS) issuance, in general, continued at a robust pace; although issuance softened somewhat in April, partly reflecting seasonal factors, it recovered in May. Spreads on CMBS
were little changed over the intermeeting period, remaining near their post-crisis lows.

Residential mortgage financing conditions remained accommodative for most borrowers. For borrowers with
low credit scores, conditions stayed tight but continued
to ease. Growth in home-purchase mortgages slowed a
bit and refinancing activity continued to be muted in recent months, with both developments partly reflecting
the rise in mortgage rates earlier this year.
Financing conditions in consumer credit markets were
little changed in the first few months of 2018, on balance, and remained largely supportive of growth in
household spending. Growth in consumer credit slowed
a bit in the first quarter, as seasonally adjusted credit card
balances were about flat after having surged in the fourth
quarter of last year. Financing conditions for consumers
with subprime credit scores continued to tighten, likely
contributing to a decline in auto loan extensions to such
borrowers.
Staff Economic Outlook
In the U.S. economic forecast prepared for the June
FOMC meeting, the staff continued to project that the
economy would expand at an above-trend pace. Real
GDP appeared to be rising at a much faster pace in the
second quarter than in the first, and it was forecast to
increase at a solid rate in the second half of this year.
Over the 2018–20 period, output was projected to rise
further above the staff’s estimate of its potential, and the
unemployment rate was projected to decline further below the staff’s estimate of its longer-run natural rate.
Relative to the forecast prepared for the May meeting,
the projection for real GDP growth beyond the first half
of 2018 was revised down a little in response to a higher
assumed path for the exchange value of the dollar. In
addition, the staff continued to anticipate that supply
constraints might restrain output growth somewhat.
With real GDP rising a little less, on balance, over the
forecast period, the projected decline in the unemployment rate over the next few years was a touch smaller
than in the previous forecast.
The staff forecast for total PCE price inflation from
2018 to 2020 was not revised materially. Total consumer
price inflation over the first half of 2018 appeared to be
a little lower than in the previous projection, mainly because of slightly softer incoming data on nonmarket
prices, but the forecast for the second half of the year
was a little higher, reflecting an upward revision to projected consumer energy prices over the next couple of
quarters. The staff continued to project that total PCE
inflation would remain near the Committee’s 2 percent
objective over the medium term and that core PCE price
inflation would run slightly higher than total inflation

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over that period because of a projected decline in consumer energy prices in 2019 and 2020.
The staff viewed the uncertainty around its projections
for real GDP growth, the unemployment rate, and inflation as similar to the average of the past 20 years. The
staff saw the risks to the forecasts for real GDP growth
and the unemployment rate as balanced. On the upside,
recent fiscal policy changes could lead to a greater expansion in economic activity over the next few years
than the staff projected. On the downside, those fiscal
policy changes could yield less impetus to the economy
than the staff expected if, for example, the marginal propensities to consume for groups most affected by the tax
cuts are lower than the staff had assumed. Risks to the
inflation projection also were seen as balanced. The upside risk that inflation could increase more than expected
in an economy that was projected to move further above
its potential was counterbalanced by the downside risk
that longer-term inflation expectations may be lower
than was assumed in the staff forecast.
Participants’ Views on Current Conditions and the
Economic Outlook
In conjunction with this FOMC meeting, members of
the Board of Governors and Federal Reserve Bank presidents submitted their projections of the most likely outcomes for real GDP growth, the unemployment rate,
and inflation for each year from 2018 through 2020 and
over the longer run, based on their individual assessments of the appropriate path for the federal funds rate.
The longer-run projections represented each participant’s assessment of the rate to which each variable
would be expected to converge, over time, under appropriate monetary policy and in the absence of further
shocks to the economy. These projections and policy
assessments are described in the Summary of Economic
Projections, which is an addendum to these minutes.
In their discussion of the economic situation and the
outlook, meeting participants agreed that information
received since the FOMC met in May indicated that the
labor market had continued to strengthen and that economic activity had been rising at a solid rate. Job gains
had been strong, on average, in recent months, and the
unemployment rate had declined. Recent data suggested
that growth of household spending had picked up, while
business fixed investment had continued to grow
strongly. On a 12-month basis, overall inflation and core
inflation, which excludes changes in food and energy
prices, had both moved close to 2 percent. Indicators of
longer-term inflation expectations were little changed,
on balance.

Participants viewed recent readings on spending, employment, and inflation as suggesting little change, on
balance, in their assessments of the economic outlook.
Incoming data suggested that GDP growth strengthened
in the second quarter of this year, as growth of consumer
spending picked up after slowing earlier in the year. Participants noted a number of favorable economic factors
that were supporting above-trend GDP growth; these
included a strong labor market, stimulative federal tax
and spending policies, accommodative financial conditions, and continued high levels of household and business confidence. They also generally expected that further gradual increases in the target range for the federal
funds rate would be consistent with sustained expansion
of economic activity, strong labor market conditions,
and inflation near the Committee’s symmetric 2 percent
objective over the medium term. Participants generally
viewed the risks to the economic outlook as roughly balanced.
Participants reported that business fixed investment had
continued to expand at a strong pace in recent months,
supported in part by substantial investment growth in
the energy sector. Higher oil prices were expected to
continue to support investment in that sector, and District contacts in the industry were generally upbeat,
though supply constraints for labor and infrastructure
were reportedly limiting expansion plans. By contrast,
District reports regarding the construction sector were
mixed, although here, too, some contacts reported that
supply constraints were acting as a drag on activity. Conditions in both the manufacturing and service sectors in
several Districts were reportedly strong and were seen as
contributing to solid investment gains. However, many
District contacts expressed concern about the possible
adverse effects of tariffs and other proposed trade restrictions, both domestically and abroad, on future investment activity; contacts in some Districts indicated
that plans for capital spending had been scaled back or
postponed as a result of uncertainty over trade policy.
Contacts in the steel and aluminum industries expected
higher prices as a result of the tariffs on these products
but had not planned any new investments to increase capacity. Conditions in the agricultural sector reportedly
improved somewhat, but contacts were concerned about
the effect of potentially higher tariffs on their exports.
Participants agreed that labor market conditions
strengthened further over the intermeeting period.
Nonfarm payroll employment posted strong gains in recent months, averaging more than 200,000 per month
this year. The unemployment rate fell to 3.8 percent in

Minutes of the Meeting of June 12–13, 2018
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May, below the estimate of each participant who submitted a longer-run projection. Participants pointed to
other indicators such as a very high rate of job openings
and an elevated quits rate as additional signs that labor
market conditions were strong. With economic growth
anticipated to remain above trend, participants generally
expected the unemployment rate to remain below, or decline further below, their estimates of its longer-run normal rate. Several participants, however, suggested that
there may be less tightness in the labor market than implied by the unemployment rate alone, because there was
further scope for a strong labor market to continue to
draw individuals into the workforce.
Contacts in several Districts reported difficulties finding
qualified workers, and, in some cases, firms were coping
with labor shortages by increasing salaries and benefits
in order to attract or retain workers. Other business
contacts facing labor shortages were responding by increasing training for less-qualified workers or by investing in automation. On balance, for the economy overall,
recent data on average hourly earnings indicated that
wage increases remained moderate. A number of participants noted that, with the unemployment rate expected
to remain below estimates of its longer-run normal rate,
they anticipated wage inflation to pick up further.
Participants noted that the 12-month changes in both
overall and core PCE prices had recently moved close to
2 percent. The recent large increases in consumer energy prices had pushed up total PCE price inflation relative to the core measure, and this divergence was expected to continue in the near term, resulting in a temporary increase in overall inflation above the Committee’s 2 percent longer-run objective. In general, participants viewed recent price developments as consistent
with their expectation that inflation was on a trajectory
to achieve the Committee’s symmetric 2 percent objective on a sustained basis, although a number of participants noted that it was premature to conclude that the
Committee had achieved that objective. The generally
favorable outlook for inflation was buttressed by reports
from business contacts in several Districts suggesting
some firming of inflationary pressures; for example,
many business contacts indicated that they were experiencing rising input costs, and, in some cases, firms appeared to be passing these cost increases through to consumer prices. Although core inflation and the 12-month
trimmed mean PCE inflation rate calculated by the Federal Reserve Bank of Dallas remained a little below
2 percent, many participants anticipated that high levels
of resource utilization and stable inflation expectations

would keep overall inflation near 2 percent over the medium term. In light of inflation having run below the
Committee’s 2 percent objective for the past several
years, a few participants cautioned that measures of
longer-run inflation expectations derived from financial
market data remained somewhat below levels consistent
with the Committee’s 2 percent objective. Accordingly,
in their view, investors appeared to judge the expected
path of inflation as running a bit below 2 percent over
the medium run. Some participants raised the concern
that a prolonged period in which the economy operated
beyond potential could give rise to heightened inflationary pressures or to financial imbalances that could lead
eventually to a significant economic downturn.
Participants commented on a number of risks and uncertainties associated with their outlook for economic
activity, the labor market, and inflation over the medium
term. Most participants noted that uncertainty and risks
associated with trade policy had intensified and were
concerned that such uncertainty and risks eventually
could have negative effects on business sentiment and
investment spending. Participants generally continued
to see recent fiscal policy changes as supportive of economic growth over the next few years, and a few indicated that fiscal policy posed an upside risk. A few participants raised the concern that fiscal policy is not currently on a sustainable path. Many participants saw potential downside risks to economic growth and inflation
associated with political and economic developments in
Europe and some EMEs.
Meeting participants also discussed the term structure of
interest rates and what a flattening of the yield curve
might signal about economic activity going forward.
Participants pointed to a number of factors, other than
the gradual rise of the federal funds rate, that could contribute to a reduction in the spread between long-term
and short-term Treasury yields, including a reduction in
investors’ estimates of the longer-run neutral real interest rate; lower longer-term inflation expectations; or a
lower level of term premiums in recent years relative to
historical experience reflecting, in part, central bank asset purchases. Some participants noted that such factors
might temper the reliability of the slope of the yield
curve as an indicator of future economic activity; however, several others expressed doubt about whether such
factors were distorting the information content of the
yield curve. A number of participants thought it would
be important to continue to monitor the slope of the
yield curve, given the historical regularity that an inverted yield curve has indicated an increased risk of recession in the United States. Participants also discussed

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a staff presentation of an indicator of the likelihood of
recession based on the spread between the current level
of the federal funds rate and the expected federal funds
rate several quarters ahead derived from futures market
prices. The staff noted that this measure may be less
affected by many of the factors that have contributed to
the flattening of the yield curve, such as depressed term
premiums at longer horizons. Several participants cautioned that yield curve movements should be interpreted
within the broader context of financial conditions and
the outlook, and would be only one among many considerations in forming an assessment of appropriate policy.
In their consideration of monetary policy at this meeting,
participants generally agreed that the economic expansion was progressing roughly as anticipated, with real
economic activity expanding at a solid rate, labor market
conditions continuing to strengthen, and inflation near
the Committee’s objective. Based on their current assessments, almost all participants expressed the view
that it would be appropriate for the Committee to continue its gradual approach to policy firming by raising the
target range for the federal funds rate 25 basis points at
this meeting. These participants agreed that, even after
such an increase in the target range, the stance of monetary policy would remain accommodative, supporting
strong labor market conditions and a sustained return to
2 percent inflation. One participant remarked that, with
inflation having run consistently below 2 percent in recent years and market-based measures of inflation compensation still low, postponing an increase in the target
range for the federal funds rate would help push inflation expectations up to levels consistent with the Committee’s objective.
With regard to the medium-term outlook for monetary
policy, participants generally judged that, with the economy already very strong and inflation expected to run at
2 percent on a sustained basis over the medium term, it
would likely be appropriate to continue gradually raising
the target range for the federal funds rate to a setting that
was at or somewhat above their estimates of its longerrun level by 2019 or 2020. Participants reaffirmed that
adjustments to the path for the policy rate would depend
on their assessments of the evolution of the economic
outlook and risks to the outlook relative to the Committee’s statutory objectives.
Participants pointed to various reasons for raising shortterm interest rates gradually, including the uncertainty
surrounding the level of the federal funds rate in the

longer run, the lags with which changes in monetary policy affect the economy, and the potential constraints on
adjustments in the target range for the federal funds rate
in response to adverse shocks when short-term interest
rates are low. In addition, a few participants saw surveyor market-based indicators as suggesting that inflation
expectations were not yet firmly anchored at a level consistent with the Committee’s objective. A few also noted
that a temporary period of inflation modestly above
2 percent could be helpful in anchoring longer-run inflation expectations at a level consistent with the Committee’s symmetric objective.
Participants offered their views about how much additional policy firming would likely be required to sustainably achieve the Committee’s objectives of maximum
employment and 2 percent inflation. Many noted that,
if gradual increases in the target range for the federal
funds rate continued, the federal funds rate could be at
or above their estimates of its neutral level sometime
next year. In that regard, participants discussed how the
Committee’s communications might evolve over coming meetings if the economy progressed about as anticipated; in particular, a number of them noted that it might
soon be appropriate to modify the language in the
postmeeting statement indicating that “the stance of
monetary policy remains accommodative.”
Participants supported a plan to implement a technical
adjustment to the IOER rate that would place it at a level
5 basis points below the top of the FOMC’s target range
for the federal funds rate. A few participants suggested
that, before too long, the Committee might want to further discuss how it can implement monetary policy most
effectively and efficiently when the quantity of reserve
balances reaches a level appreciably below that seen recently.
Committee Policy Action
In their discussion of monetary policy for the period
ahead, members judged that information received since
the FOMC met in May indicated that the labor market
had continued to strengthen and that economic activity
had been rising at a solid rate. Job gains had been strong,
on average, in recent months, and the unemployment
rate had declined. Recent data suggested that growth of
household spending had picked up, while business fixed
investment had continued to grow strongly. On a
12-month basis, both overall inflation and inflation for
items other than food and energy had moved close to
2 percent. Indicators of longer-term inflation expectations were little changed, on balance.

Minutes of the Meeting of June 12–13, 2018
Page 9
_____________________________________________________________________________________________

Members viewed the recent data as consistent with a
strong economy that was evolving about as they had expected. They judged that continuing along a path of
gradual policy firming would balance the risk of moving
too quickly, which could leave inflation short of a sustained return to the Committee’s symmetric goal, against
the risk of moving too slowly, which could lead to a
buildup of inflation pressures or material financial imbalances. Consequently, members expected that further
gradual increases in the target range for the federal funds
rate would be consistent with sustained expansion of
economic activity, strong labor market conditions, and
inflation near the Committee’s symmetric 2 percent objective over the medium term. Members continued to
judge that the risks to the economic outlook remained
roughly balanced.
After assessing current conditions and the outlook for
economic activity, the labor market, and inflation, members voted to raise the target range for the federal funds
rate to 1¾ to 2 percent. They indicated that the stance
of monetary policy remained accommodative, thereby
supporting strong labor market conditions and a sustained return to 2 percent inflation.
Members agreed that the timing and size of future adjustments to the target range for the federal funds rate
would depend upon their assessment of realized and expected economic conditions relative to the Committee’s
maximum employment objective and symmetric 2 percent inflation objective. They reiterated that this assessment would take into account a wide range of information, including measures of labor market conditions,
indicators of inflation pressures and inflation expectations, and readings on financial and international developments.
With regard to the postmeeting statement, members favored the removal of the forward-guidance language
stating that “the federal funds rate is likely to remain, for
some time, below levels that are expected to prevail in
the longer run.” Members noted that, although this
forward-guidance language had been useful for communicating the expected path of the federal funds rate
during the early stages of policy normalization, this language was no longer appropriate in light of the strong
state of the economy and the current expected path for
policy. Moreover, the removal of the forward-guidance
language and other changes to the statement should
streamline and facilitate the Committee’s communications. Importantly, the changes were a reflection of the
progress toward achieving the Committee’s statutory

goals and did not reflect a shift in the approach to policy
going forward.
At the conclusion of the discussion, the Committee
voted to authorize and direct the Federal Reserve Bank
of New York, until it was instructed otherwise, to execute transactions in the SOMA in accordance with the
following domestic policy directive, to be released at
2:00 p.m.:
“Effective June 14, 2018, the Federal Open
Market Committee directs the Desk to undertake open market operations as necessary to
maintain the federal funds rate in a target range
of 1¾ to 2 percent, including overnight reverse
repurchase operations (and reverse repurchase
operations with maturities of more than one day
when necessary to accommodate weekend, holiday, or similar trading conventions) at an offering rate of 1.75 percent, in amounts limited only
by the value of Treasury securities held outright
in the System Open Market Account that are
available for such operations and by a percounterparty limit of $30 billion per day.
The Committee directs the Desk to continue
rolling over at auction the amount of principal
payments from the Federal Reserve’s holdings
of Treasury securities maturing during June that
exceeds $18 billion, and to continue reinvesting
in agency mortgage-backed securities the
amount of principal payments from the Federal
Reserve’s holdings of agency debt and agency
mortgage-backed securities received during
June that exceeds $12 billion. Effective in July,
the Committee directs the Desk to roll over at
auction the amount of principal payments from
the Federal Reserve’s holdings of Treasury securities maturing during each calendar month
that exceeds $24 billion, and to reinvest in
agency mortgage-backed securities the amount
of principal payments from the Federal Reserve’s holdings of agency debt and agency
mortgage-backed securities received during
each calendar month that exceeds $16 billion.
Small deviations from these amounts for operational reasons are acceptable.
The Committee also directs the Desk to engage
in dollar roll and coupon swap transactions as
necessary to facilitate settlement of the Federal
Reserve’s agency mortgage-backed securities
transactions.”

Page 10
Federal Open Market Committee
_____________________________________________________________________________________________

The vote also encompassed approval of the statement
below to be released at 2:00 p.m.:
“Information received since the Federal Open
Market Committee met in May indicates that
the labor market has continued to strengthen
and that economic activity has been rising at a
solid rate. Job gains have been strong, on average, in recent months, and the unemployment
rate has declined. Recent data suggest that
growth of household spending has picked up,
while business fixed investment has continued
to grow strongly. On a 12-month basis, both
overall inflation and inflation for items other
than food and energy have moved close to
2 percent. Indicators of longer-term inflation
expectations are little changed, on balance.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment
and price stability. The Committee expects that
further gradual increases in the target range for
the federal funds rate will be consistent with
sustained expansion of economic activity,
strong labor market conditions, and inflation
near the Committee’s symmetric 2 percent objective over the medium term. Risks to the economic outlook appear roughly balanced.
In view of realized and expected labor market
conditions and inflation, the Committee decided to raise the target range for the federal
funds rate to 1¾ to 2 percent. The stance of
monetary policy remains accommodative,
thereby supporting strong labor market conditions and a sustained return to 2 percent inflation.
In determining the timing and size of future adjustments to the target range for the federal
funds rate, the Committee will assess realized
and expected economic conditions relative to its
maximum employment objective and its symmetric 2 percent inflation objective. This assessment will take into account a wide range of
In taking this action, the Board approved requests submitted
by the boards of directors of the Federal Reserve Banks of
Boston, Philadelphia, Cleveland, Richmond, Atlanta, Chicago,
St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco. This vote also encompassed approval by the Board of
Governors of the establishment of a 2½ percent primary
credit rate by the remaining Federal Reserve Bank, effective
on the later of June 14, 2018, and the date such Reserve Bank

4

information, including measures of labor market conditions, indicators of inflation pressures
and inflation expectations, and readings on financial and international developments.”
Voting for this action: Jerome H. Powell, William C.
Dudley, Thomas I. Barkin, Raphael W. Bostic, Lael
Brainard, Loretta J. Mester, Randal K. Quarles, and John
C. Williams.
Voting against this action: None.
To support the Committee’s decision to raise the target
range for the federal funds rate, the Board of Governors
voted unanimously to raise the interest rates on required
and excess reserve balances to 1.95 percent, effective
June 14, 2018. The Board of Governors also voted
unanimously to approve a ¼ percentage point increase
in the primary credit rate (discount rate) to 2½ percent,
effective June 14, 2018. 4
Election of Committee Vice Chairman
By unanimous vote, the Committee selected John C.
Williams to serve as Vice Chairman, effective on
June 18, 2018, until the selection of a successor at the
Committee’s first regularly scheduled meeting in 2019.
It was agreed that the next meeting of the Committee
would be held on Tuesday–Wednesday, July 31–
August 1, 2018. The meeting adjourned at 10:00 a.m. on
June 13, 2018.
Notation Vote
By notation vote completed on May 22, 2018, the Committee unanimously approved the minutes of the Committee meeting held on May 1-2, 2018.

_____________________________
James A. Clouse
Secretary

informed the Secretary of the Board of such a request. (Secretary’s note: Subsequently, the Federal Reserve Bank of New
York was informed by the Secretary of the Board of the
Board’s approval of their establishment of a primary credit
rate of 2½ percent, effective June 14, 2018.) The second vote
of the Board also encompassed approval of the establishment
of the interest rates for secondary and seasonal credit under
the existing formulas for computing such rates.

Page 1
_____________________________________________________________________________________________

Summary of Economic Projections
In conjunction with the Federal Open Market Committee (FOMC) meeting held on June 12–13, 2018, meeting
participants submitted their projections of the most
likely outcomes for real gross domestic product (GDP)
growth, the unemployment rate, and inflation for each
year from 2018 to 2020 and over the longer run. 1 Each
participant’s projections were based on information
available at the time of the meeting, together with his or
her assessment of appropriate monetary policy—including a path for the federal funds rate and its longer-run
value—and assumptions about other factors likely to affect economic outcomes. The longer-run projections
represent each participant’s assessment of the value to
which each variable would be expected to converge, over
time, under appropriate monetary policy and in the absence of further shocks to the economy. 2 “Appropriate
monetary policy” is defined as the future path of policy
that each participant deems most likely to foster outcomes for economic activity and inflation that best satisfy his or her individual interpretation of the statutory
mandate to promote maximum employment and price
stability.

2018. Table 1 and figure 1 provide summary statistics
for the projections.
As shown in figure 2, participants generally continued to
expect that the evolution of the economy relative to their
objectives of maximum employment and 2 percent inflation would likely warrant further gradual increases in
the federal funds rate. The central tendencies of participants’ projections of the federal funds rate for both
2018 and 2019 were roughly unchanged, but the medians
for both years were 25 basis points higher relative to
March. Nearly all participants who submitted longerrun projections expected that, during part of the projection period, evolving economic conditions would make
it appropriate for the federal funds rate to move somewhat above their estimates of its longer-run level.
In general, participants continued to view the uncertainty attached to their economic projections as broadly
similar to the average of the past 20 years. As in March,
most participants judged the risks around their projections for real GDP growth, the unemployment rate, and
inflation to be broadly balanced.

All participants who submitted longer-run projections
expected that, in 2018, real GDP would expand at a pace
exceeding their individual estimates of the longer-run
growth rate of real GDP. Participants generally saw real
GDP growth moderating somewhat in each of the following two years but remaining above their estimates of
the longer-run rate. All participants who submitted
longer-run projections expected that, throughout the
projection period, the unemployment rate would run below their estimates of its longer-run level. All participants projected that inflation, as measured by the fourquarter percentage change in the price index for personal
consumption expenditures (PCE), would run at or
slightly above the Committee’s 2 percent objective by
the end of 2018 and remain roughly flat through 2020.
Compared with the Summary of Economic Projections
(SEP) from March, most participants slightly marked up
their projections of real GDP growth in 2018 and somewhat lowered their projections for the unemployment
rate from 2018 through 2020; participants indicated that
these revisions reflected, in large part, strength in incoming data. A large majority of participants made slight upward adjustments to their projections of inflation in

The Outlook for Economic Activity
The median of participants’ projections for the growth
rate of real GDP, conditional on their individual assessments of appropriate monetary policy, was 2.8 percent
for this year and 2.4 percent for next year. The median
was 2.0 percent for 2020, a touch above the median projection of longer-run growth. Most participants continued to cite fiscal policy as a driver of strong economic
activity over the next couple of years. Many participants
also mentioned accommodative monetary policy and financial conditions, strength in the global outlook, continued momentum in the labor market, or positive readings on business and consumer sentiment as important
factors shaping the economic outlook. Compared with
the March SEP, the median of participants’ projections
for the rate of real GDP growth was 0.1 percentage
point higher for this year and unchanged for the next
two years.

Three members of the Board of Governors were in office at
the time of the June 2018 meeting.

2 One participant did not submit longer-run projections for
real GDP growth, the unemployment rate, or the federal funds
rate.

1

Almost all participants expected the unemployment rate
to decline somewhat further over the projection period.
The median of participants’ projections for the unemployment rate was 3.6 percent for the final quarter of
this year and 3.5 percent for the final quarters of 2019

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
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 inflation
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 inflation4
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 inflation are percent changes from the
fourth quarter of the previous year to the fourth quarter of the year indicated. PCE inflation and core PCE inflation are the percentage rates of change
in, respectively, the price index for personal consumption expenditures (PCE) and the price index for PCE excluding food and energy. Projections for
the unemployment rate are for the average civilian unemployment rate in the fourth quarter of the year indicated. Each participant’s projections are
based on his or her assessment of appropriate monetary policy. Longer-run projections represent each participant’s assessment of the rate to which each
variable would be expected to converge under appropriate monetary policy and in the absence of further shocks to the economy. The 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 specified 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 inflation are not collected.

Page 2
Federal Open Market Committee
_____________________________________________________________________________________________

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

Summary of Economic Projections of the Meeting of June 12–13, 2018
Page 3
_____________________________________________________________________________________________
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.

Page 4
Federal Open Market Committee
_____________________________________________________________________________________________
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.

Summary of Economic Projections of the Meeting of June 12–13, 2018
Page 5
_____________________________________________________________________________________________

and 2020. The median of participants’ estimates of the
longer-run unemployment rate was unchanged at
4.5 percent.
Figures 3.A and 3.B show the distributions of participants’ projections for real GDP growth and the unemployment rate from 2018 to 2020 and over the longer
run. The distribution of individual projections for real
GDP growth this year shifted up noticeably from that in
the March SEP. By contrast, the distributions of projected real GDP growth in 2019 and 2020 and over the
longer run were little changed. The distributions of individual projections for the unemployment rate in 2018
to 2020 shifted down relative to the distributions in
March, while the downward shift in the distribution of
longer-run projections was very modest.
The Outlook for Inflation
The medians of participants’ projections for total and
core PCE price inflation in 2018 were 2.1 percent and
2.0 percent, respectively, and the median for each measure was 2.1 percent in 2019 and 2020. Compared with
the March SEP, the medians of participants’ projections
for total PCE price inflation for this year and next were
revised up slightly. Some participants pointed to incoming data on energy prices as a reason for their upward
revisions. The median of participants’ forecasts for core
PCE price inflation was up a touch for this year and unchanged for subsequent years.
Figures 3.C and 3.D provide information on the distributions of participants’ views about the outlook for inflation. The distributions of both total and core PCE
price inflation for 2018 shifted to the right relative to the
distributions in March. The distributions of projected
inflation in 2019, 2020, and over the longer run were
roughly unchanged. Participants generally expected
each measure to be at or slightly above 2 percent in 2019
and 2020.
Appropriate Monetary Policy
Figure 3.E provides the distribution of participants’
judgments regarding the appropriate target—or midpoint of the target range—for the federal funds rate at
the end of each year from 2018 to 2020 and over the
longer run. The distributions of projected policy rates
through 2020 shifted modestly higher, consistent with
the revisions to participants’ projections of real GDP
growth, the unemployment rate, and inflation. As in
their March projections, a large majority of participants
anticipated that evolving economic conditions would
likely warrant the equivalent of a total of either three or
four increases of 25 basis points in the target range for

the federal funds rate over 2018. There was a slight reduction in the dispersion of participants’ views, with no
participant regarding the appropriate target at the end of
the year to be below 1.88 percent. For each subsequent
year, the dispersion of participants’ year-end projections
was somewhat smaller than that in the March SEP.
The medians of participants’ projections of the federal
funds rate rose gradually to 2.4 percent at the end of this
year, 3.1 percent at the end of 2019, and 3.4 percent at
the end of 2020. The median of participants’ longer-run
estimates, at 2.9 percent, was unchanged relative to the
March SEP.
In discussing their projections, many participants continued to express the view that the appropriate trajectory
of the federal funds rate over the next few years would
likely involve gradual increases. This view was predicated on several factors, including a judgment that a
gradual path of policy firming likely would appropriately
balance the risks associated with, among other considerations, the possibilities that U.S. fiscal policy could have
larger or more persistent positive effects on real activity
and that shifts in trade policy or developments abroad
could weigh on the expansion. As always, the appropriate path of the federal funds rate would depend on
evolving economic conditions and their implications for
participants’ economic outlooks and assessments of
risks.
Uncertainty and Risks
In assessing the path for the federal funds rate that, in
their view, is likely to be appropriate, FOMC participants
take account of the range of possible economic outcomes, the likelihood of those outcomes, and the potential benefits and costs should they occur. As a reference,
table 2 provides measures of forecast uncertainty, based
on the forecast errors of various private and government
forecasts over the past 20 years, for real GDP growth,
the unemployment rate, and total PCE price inflation.
Those measures are represented graphically in the “fan
charts” shown in the top panels of figures 4.A, 4.B, and
4.C. The fan charts display the median SEP projections
for the three variables surrounded by symmetric confidence intervals derived from the forecast errors reported
in table 2. If the degree of uncertainty attending these
projections is similar to the typical magnitude of past
forecast errors and the risks around the projections are
broadly balanced, then future outcomes of these variables would have about a 70 percent probability of being
within these confidence intervals. For all three variables,
this measure of uncertainty is substantial and generally
increases as the forecast horizon lengthens.

Page 6
Federal Open Market Committee
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Figure 3.A. Distribution of participants’ projections for the change in real GDP, 2018–20 and over the longer run
Number of participants

2018
18
16
14
12
10
8
6
4
2

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

3.0 3.1

Percent range
Number of participants

2019
18
16
14
12
10
8
6
4
2
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
Number of participants

2020
18
16
14
12
10
8
6
4
2
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
Number of participants

Longer run
18
16
14
12
10
8
6
4
2
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

Percent range

Note: Definitions of variables and other explanations are in the notes to table 1.

2.8 2.9

3.0 3.1

Summary of Economic Projections of the Meeting of June 12–13, 2018
Page 7
_____________________________________________________________________________________________
Figure 3.B. Distribution of participants’ projections for the unemployment rate, 2018–20 and over the longer run
Number of participants

2018
18
16
14
12
10
8
6
4
2

June projections
March projections

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
18
16
14
12
10
8
6
4
2
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

2020
18
16
14
12
10
8
6
4
2
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

Longer run
18
16
14
12
10
8
6
4
2
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

Percent range

Note: Definitions of variables and other explanations are in the notes to table 1.

4.6 4.7

4.8 4.9

5.0 5.1

Page 8
Federal Open Market Committee
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Figure 3.C. Distribution of participants’ projections for PCE inflation, 2018–20 and over the longer run
Number of participants

2018
18
16
14
12
10
8
6
4
2

June projections
March projections

1.7 1.8

1.9 2.0

2.1 2.2

2.3 2.4

Percent range
Number of participants

2019
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
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

Longer run
18
16
14
12
10
8
6
4
2
1.7 1.8

1.9 2.0

2.1 2.2

Percent range

Note: Definitions of variables and other explanations are in the notes to table 1.

2.3 2.4

Summary of Economic Projections of the Meeting of June 12–13, 2018
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Figure 3.D. Distribution of participants’ projections for core PCE inflation, 2018–20
Number of participants

2018
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
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
18
16
14
12
10
8
6
4
2
1.7 1.8

1.9 2.0

2.1 2.2

Percent range

Note: Definitions of variables and other explanations are in the notes to table 1.

2.3 2.4

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Federal Open Market Committee
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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
18
16
14
12
10
8
6
4
2

June projections
March projections

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

2019
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

2020
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
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

Percent range
Note: Definitions of variables and other explanations are in the notes to table 1.

4.38 4.62

4.63 4.87

4.88 5.12

Summary of Economic Projections of the Meeting of June 12–13, 2018
Page 11
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Table 2. Average historical projection error ranges
Percentage points

Variable

2018

2019

2020

Change in real GDP1 . . . . . . .

±1.3

±2.0

±2.1

±0.4

±1.2

±1.8

±0.7

±1.0

±1.0

±0.7

±2.0

±2.2

Unemployment

rate1

Total consumer

prices2

Short-term interest

.......
.....

rates3

....

NOTE: Error ranges shown are measured as plus or minus the root
mean squared error of projections for 1998 through 2017 that were released in the summer by various private and government forecasters. As
described in the box “Forecast Uncertainty,” under certain assumptions,
there is about a 70 percent probability that actual outcomes for real
GDP, unemployment, consumer prices, and the federal funds rate will
be in ranges implied by the average size of projection errors made in the
past. For more information, see David Reifschneider and Peter Tulip
(2017), “Gauging the Uncertainty of the Economic Outlook Using Historical Forecasting Errors: The Federal Reserve’s Approach,” Finance
and Economics Discussion Series 2017-020 (Washington: Board of
Governors of the Federal Reserve System, February), www.federal
reserve.gov/econresdata/feds/2017/files/2017020pap.pdf.
1. Definitions of variables are in the general note to table 1.
2. Measure is the overall consumer price index, the price measure
that has been most widely used in government and private economic
forecasts. Projections are percent changes on a fourth quarter to fourth
quarter basis.
3. For Federal Reserve staff forecasts, measure is the federal funds
rate. For other forecasts, measure is the rate on 3-month Treasury bills.
Projection errors are calculated using average levels, in percent, in the
fourth quarter.

Participants’ assessments of the level of uncertainty surrounding their individual economic projections are
shown in the bottom-left panels of figures 4.A, 4.B, and
4.C. Nearly all participants viewed the degree of uncertainty attached to their economic projections for real
GDP growth, the unemployment rate, and inflation as
broadly similar to the average of the past 20 years, a view
that was essentially unchanged from March.3
Because the fan charts are constructed to be symmetric
around the median projections, they do not reflect any
asymmetries in the balance of risks that participants may
see in their economic projections. Participants’ assessments of the balance of risks to their economic projections are shown in the bottom-right panels of figures 4.A, 4.B, and 4.C. Most participants judged the
risks to their projections of real GDP growth, the
unemployment rate, total inflation, and core inflation as

At the end of this summary, the box “Forecast Uncertainty”
discusses the sources and interpretation of uncertainty surrounding the economic forecasts and explains the approach

3

broadly balanced—in other words, as broadly consistent
with a symmetric fan chart. Compared with March, even
more participants saw the risks to their projections as
broadly balanced. Specifically, for GDP growth, only
one participant viewed the risks as tilted to the downside,
and the number of participants who viewed the risks as
tilted to the upside dropped from four to two. For the
unemployment rate, the number of participants who saw
the risks as tilted toward low readings dropped from four
to two. For inflation, all but one participant judged the
risks to either total or core PCE price inflation as broadly
balanced.
In discussing the uncertainty and risks surrounding their
projections, several participants continued to point to
fiscal developments as a source of upside risk, many participants cited developments related to trade policy as
posing downside risks to their growth forecasts, and a
few participants also pointed to political developments
in Europe or the global outlook more generally as downside-risk factors. A few participants noted that the appreciation of the dollar posed downside risks to the inflation outlook. A few participants also noted the risk
of inflation moving higher than anticipated as the unemployment rate falls.
Participants’ assessments of the appropriate future path
of the federal funds rate were also subject to considerable uncertainty. Because the Committee adjusts the federal funds rate in response to actual and prospective developments over time in real GDP growth, the unemployment rate, and inflation, uncertainty surrounding the
projected path for the federal funds rate importantly reflects the uncertainties about the paths for those key economic variables. Figure 5 provides a graphical representation of this uncertainty, plotting the median SEP projection for the federal funds rate surrounded by confidence intervals derived from the results presented in table 2. As with the macroeconomic variables, forecast
uncertainty surrounding the appropriate path of the federal funds rate is substantial and increases for longer horizons.

used to assess the uncertainty and risks attending the participants’ projections.

Page 12
Federal Open Market Committee
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Figure 4.A. Uncertainty and risks in projections of GDP growth

Median projection and confidence interval based on historical forecast errors

Percent

Change in real GDP
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

18
16
14
12
10
8
6
4
2

Broadly
similar

Number of participants

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.”

Summary of Economic Projections of the Meeting of June 12–13, 2018
Page 13
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Figure 4.B. Uncertainty and risks in projections of the unemployment rate

Median projection and confidence interval based on historical forecast errors

Percent

Unemployment rate

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

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

Broadly
similar

Higher

Number of participants

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.”

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Federal Open Market Committee
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Figure 4.C. Uncertainty and risks in projections of PCE inflation

Median projection and confidence interval based on historical forecast errors

Percent

PCE inflation
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

18
16
14
12
10
8
6
4
2

Broadly
similar

Number of participants

Higher

June projections
March projections

Weighted to
downside

18
16
14
12
10
8
6
4
2

Broadly
balanced

Number of participants

Uncertainty about core PCE inflation
18
16
14
12
10
8
6
4
2

Broadly
similar

Number of participants

Risks to core PCE inflation

June projections
March projections

Lower

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.”

Summary of Economic Projections of the Meeting of June 12–13, 2018
Page 15
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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 confidence 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 confidence 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 offset the effects of shocks to the economy.
The confidence 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 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.
* The confidence 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 confidence interval if the confidence interval has been truncated at zero.

Page 16
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Forecast Uncertainty
The economic projections provided by the members of
the Board of Governors and the presidents of the Federal
Reserve Banks inform discussions of monetary policy among
policymakers and can aid public understanding of the basis
for policy actions. Considerable uncertainty attends these
projections, however. The economic and statistical models
and relationships used to help produce economic forecasts
are necessarily imperfect descriptions of the real world, and
the future path of the economy can be affected by myriad
unforeseen developments and events. Thus, in setting the
stance of monetary policy, participants consider not only
what appears to be the most likely economic outcome as embodied in their projections, but also the range of alternative
possibilities, the likelihood of their occurring, and the potential costs to the economy should they occur.
Table 2 summarizes the average historical accuracy of a
range of forecasts, including those reported in past Monetary
Policy Reports and those prepared by the Federal Reserve
Board’s staff in advance of meetings of the Federal Open
Market Committee (FOMC). The projection error ranges
shown in the table illustrate the considerable uncertainty associated with economic forecasts. For example, suppose a
participant projects that real gross domestic product (GDP)
and total consumer prices will rise steadily at annual rates of,
respectively, 3 percent and 2 percent. If the uncertainty attending those projections is similar to that experienced in the
past and the risks around the projections are broadly balanced, the numbers reported in table 2 would imply a probability of about 70 percent that actual GDP would expand
within a range of 1.7 to 4.3 percent in the current year, 1.0 to
5.0 percent in the second year, and 0.9 to 5.1 percent in the
third year. The corresponding 70 percent confidence intervals for overall inflation would be 1.3 to 2.7 percent in the
current year and 1.0 to 3.0 percent in the second and third
years. Figures 4.A through 4.C illustrate these confidence
bounds in “fan charts” that are symmetric and centered on
the medians of FOMC participants’ projections for GDP
growth, the unemployment rate, and inflation. However, in
some instances, the risks around the projections may not be
symmetric. In particular, the unemployment rate cannot be
negative; furthermore, the risks around a particular projection might be tilted to either the upside or the downside, in
which case the corresponding fan chart would be asymmetrically positioned around the median projection.
Because current conditions may differ from those that
prevailed, on average, over history, participants provide
judgments as to whether the uncertainty attached to their
projections of each economic variable is greater than, smaller
than, or broadly similar to typical levels of forecast uncertainty seen in the past 20 years, as presented in table 2 and
reflected in the widths of the confidence intervals shown in
the top panels of figures 4.A through 4.C. Participants’ current assessments of the uncertainty surrounding their projec-

tions are summarized in the bottom-left panels of those figures. Participants also provide judgments as to whether the
risks to their projections are weighted to the upside, are
weighted to the downside, or are broadly balanced. That is,
while the symmetric historical fan charts shown in the top
panels of figures 4.A through 4.C imply that the risks to participants’ projections are balanced, participants may judge that
there is a greater risk that a given variable will be above rather
than below their projections. These judgments are summarized in the lower-right panels of figures 4.A through 4.C.
As with real activity and inflation, the outlook for the
future path of the federal funds rate is subject to considerable
uncertainty. This uncertainty arises primarily because each
participant’s assessment of the appropriate stance of monetary policy depends importantly on the evolution of real activity and inflation over time. If economic conditions evolve
in an unexpected manner, then assessments of the appropriate setting of the federal funds rate would change from that
point forward. The final line in table 2 shows the error ranges
for forecasts of short-term interest rates. They suggest that
the historical confidence intervals associated with projections
of the federal funds rate are quite wide. It should be noted,
however, that these confidence intervals are not strictly consistent with the projections for the federal funds rate, as these
projections are not forecasts of the most likely quarterly outcomes but rather are projections of participants’ individual assessments of appropriate monetary policy and are on an endof-year basis. However, the forecast errors should provide a
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 would be appropriate to offset the effects of
shocks to the economy.
If at some point in the future the confidence interval
around the federal funds rate were to extend below zero, it
would be truncated at zero for purposes of the fan chart
shown in figure 5; zero is the bottom of the lowest target
range for the federal funds rate that has been adopted by the
Committee in the past. This approach to the construction of
the federal funds rate fan chart would be merely a convention;
it would not have any implications for possible future policy
decisions regarding the use of negative interest rates to provide additional monetary policy accommodation if doing so
were appropriate. In such situations, the Committee could
also employ other tools, including forward guidance and asset
purchases, to provide additional accommodation.
While figures 4.A through 4.C provide information on
the uncertainty around the economic projections, figure 1
provides information on the range of views across FOMC
participants. A comparison of figure 1 with figures 4.A
through 4.C shows that the dispersion of the projections
across participants is much smaller than the average forecast
errors over the past 20 years.