Full text of Federal Open Market Committee Meeting Minutes, Transcripts, and Other Documents : Meeting, September 19-20, 2017 : SEP: Individual Projections

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SEP: Compilation and Summary of Individual Economic Projections

September 19–20, 2017

Table 1. Economic projections of Federal Reserve Board members and Federal Reserve Bank presidents,
under their individual assessments of projected appropriate monetary policy, September 2017
Percent

Variable
Change in real GDP
June projection

Median1
Central tendency2
Range3
2017 2018 2019 2020 Longer 2017
2018
2019
2020
2017
2018
2019
2020
Longer
Longer
run
run
run
2.4
2.1
2.0
1.8
1.8
2.2 – 2.5 2.0 – 2.3 1.7 – 2.1 1.6 – 2.0 1.8 – 2.0 2.2 – 2.7 1.7 – 2.6 1.4 – 2.3 1.4 – 2.0 1.5 – 2.2
2.2
2.1
1.9 n.a.
1.8
2.1 – 2.2 1.8 – 2.2 1.8 – 2.0
n.a.
n.a.
1.5 – 2.2
1.8 – 2.0 2.0 – 2.5 1.7 – 2.3 1.4 – 2.3

Unemployment rate
June projection

4.3
4.3

4.1
4.2

4.1
4.2

4.2
n.a.

4.6
4.6

4.2 – 4.3 4.0 – 4.2 3.9 – 4.4 4.0 – 4.5 4.5 – 4.8 4.2 – 4.5 3.9 – 4.5 3.8 – 4.5 3.8 – 4.8 4.4 – 5.0
4.2 – 4.3 4.0 – 4.3 4.1 – 4.4
n.a.
n.a.
4.5 – 5.0
4.5 – 4.8 4.1 – 4.5 3.9 – 4.5 3.8 – 4.5

PCE infation
June projection

1.6
1.6

1.9
2.0

2.0
2.0

2.0
n.a.

2.0
2.0

1.5 – 1.6 1.8 – 2.0
2.0
2.0 – 2.1
1.6 – 1.7 1.8 – 2.0 2.0 – 2.1
n.a.

Core PCE infation4
June projection

1.5
1.7

1.9
2.0

2.0
2.0

2.0
n.a.

1.4
1.4

2.1
2.1

2.7
2.9

2.9
n.a.

1.5 – 1.6 1.8 – 2.0
2.0
2.0 – 2.1
1.6 – 1.7 1.8 – 2.0 2.0 – 2.1
n.a.

2.0
2.0

1.5 – 1.7 1.7 – 2.0 1.8 – 2.2 1.9 – 2.2
n.a.
1.5 – 1.8 1.7 – 2.1 1.8 – 2.2

2.0
2.0

1.4 – 1.7 1.7 – 2.0 1.8 – 2.2 1.9 – 2.2
1.6 – 1.8 1.7 – 2.1 1.8 – 2.2
n.a.

Memo: Projected
appropriate policy path
Federal funds rate
June projection

2.8
3.0

1.1 – 1.4 1.9 – 2.4 2.4 – 3.1 2.5 – 3.5 2.5 – 3.0 1.1 – 1.6 1.1 – 2.6 1.1 – 3.4 1.1 – 3.9 2.3 – 3.5
1.1 – 1.6 1.9 – 2.6 2.6 – 3.1
n.a.
2.8 – 3.0 1.1 – 1.6 1.1 – 3.1 1.1 – 4.1
n.a.
2.5 – 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 June projections were made in conjunction with the meeting of the Federal Open Market Committee on
June 13–14, 2017. 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 June
13–14, 2017, meeting, and one participant did not submit such projections in conjunction with the September 19–20, 2017, 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.

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Page 1 of 40

SEP: Compilation and Summary of Individual Economic Projections

September 19–20, 2017

Table 1.A. Economic projections for the frst half of 2017*
(in percent)

Medians, central tendencies, and ranges
Median

Central tendency

Range

Change in real GDP
June projection

2.2
2.0

2.1 – 2.2
1.9 – 2.0

2.1 – 2.3
1.9 – 2.2

PCE infation
June projection

1.2
1.5

1.2 – 1.3
1.4 – 1.5

1.2 – 1.3
1.4 – 1.7

Core PCE infation
June projection

1.4
1.6

1.4
1.6

1.4
1.5 – 1.7

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
16

2.2
2.2
2.1
2.3
2.2
2.1
2.3
2.1
2.2
2.1
2.1
2.1
2.1
2.2
2.1
2.2

1.3
1.3
1.2
1.2
1.2
1.2
1.2
1.2
1.2
1.2
1.3
1.2
1.2
1.3
1.2
1.2

1.4
1.4
1.4
1.4
1.4
1.4
1.4
1.4
1.4
1.4
1.4
1.4
1.4
1.4
1.4
1.4

* Growth and infation are reported at annualized rates.

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Page 2 of 40

SEP: Compilation and Summary of Individual Economic Projections

September 19–20, 2017

Table 1.B. Economic projections for the second half of 2017*
(in percent)

Medians, central tendencies, and ranges
Median

Central tendency

Range

Change in real GDP
June projection

2.6
2.3

2.3 – 2.8
2.1 – 2.5

2.2 – 3.2
2.0 – 3.1

PCE infation
June projection

1.9
1.8

1.8 – 2.0
1.7 – 1.9

1.7 – 2.2
1.6 – 2.1

Core PCE infation
June projection

1.6
1.8

1.6 – 1.8
1.6 – 1.9

1.4 – 2.0
1.6 – 2.0

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
16

2.6
3.2
2.3
2.3
2.8
2.5
2.7
2.9
2.2
2.7
2.9
2.3
2.5
2.8
2.3
2.6

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

1.6
2.0
1.4
1.6
1.6
1.8
1.6
1.8
1.6
1.6
1.6
1.8
1.6
1.6
1.4
1.6

* Projections for the second half of 2017 implied by participants’ September projections for the frst half of 2017
and for 2017 as a whole. Growth and infation are reported at annualized rates.

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Page 3 of 40

SEP: Compilation and Summary of Individual Economic Projections

September 19–20, 2017

Table 2. September economic projections, 2017–20 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
16

2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017
2017

2.4
2.7
2.2
2.3
2.5
2.3
2.5
2.5
2.2
2.4
2.5
2.2
2.3
2.5
2.2
2.4

4.2
4.2
4.3
4.2
4.3
4.2
4.3
4.2
4.3
4.3
4.2
4.5
4.3
4.2
4.3
4.2

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

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

2.0
2.6
2.0
2.2
2.5
2.0
2.3
2.1
2.1
1.7
2.2
2.0
2.1
2.2
2.3
1.8

4.0
4.1
4.2
3.9
4.1
4.0
4.0
4.0
4.2
4.4
3.9
4.5
4.3
4.0
4.2
4.0

Authorized for Public Release

Unemployment
PCE
rate
infation

Page 4 of 40

Core PCE
infation

Federal
funds rate

1.5
1.7
1.5
1.5
1.6
1.6
1.6
1.7
1.5
1.7
1.5
1.5
1.6
1.5
1.6
1.5

1.5
1.7
1.4
1.5
1.5
1.6
1.5
1.6
1.5
1.5
1.5
1.6
1.5
1.5
1.4
1.5

1.38
1.38
1.63
1.38
1.13
1.38
1.13
1.38
1.38
1.38
1.38
1.13
1.38
1.13
1.38
1.38

1.8
1.8
2.0
1.9
1.7
1.9
1.7
1.8
1.9
2.0
1.9
2.0
2.0
1.7
2.0
1.8

1.8
1.9
2.0
1.9
1.7
1.9
1.7
1.9
1.9
2.0
1.9
2.0
2.0
1.7
1.9
1.8

1.88
2.13
2.63
2.13
1.13
2.13
1.88
2.38
2.38
2.13
2.38
1.13
2.13
1.63
2.50
2.13

SEP: Compilation and Summary of Individual Economic Projections

September 19–20, 2017

Table 2. (continued)
Projection

Year

Change in
real GDP

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

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

1.7
2.3
1.8
2.0
2.1
2.0
2.0
1.6
1.8
1.7
2.1
2.0
2.0
1.8
2.1
1.4

4.0
4.0
4.2
3.8
3.9
3.8
3.9
4.1
4.1
4.4
4.1
4.5
4.4
4.1
4.5
4.2

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

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

1.5
2.0
1.8
1.8
1.7
1.7
1.9
1.4
1.6
1.7
2.0
2.0
2.0
1.7
2.0
1.4

4.1
4.0
4.3
3.8
3.9
4.0
3.9
4.3
4.1
4.5
4.2
4.5
4.5
4.2
4.8
4.5

Authorized for Public Release

Unemployment
PCE
rate
infation

Page 5 of 40

Core PCE
infation

Federal
funds rate

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

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

2.38
2.88
3.13
2.63
1.63
2.38
2.75
3.38
3.38
2.88
3.13
1.13
2.63
2.13
3.25
2.50

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

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

2.63
3.50
3.63
2.88
2.38
2.63
2.75
3.88
3.50
2.88
3.13
1.13
2.88
2.38
3.00
2.50

SEP: Compilation and Summary of Individual Economic Projections

September 19–20, 2017

Table 2. (continued)
Projection

Year

Change in
real GDP

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

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

1.7
2.2
1.8
1.8
1.7
1.8
1.8
1.8
1.8
1.8
2.0

4.5
4.5
4.8
4.5
4.4
4.7
4.5
4.7
5.0
4.6
4.7

2.0
1.9
2.0
1.5

4.6
4.5
4.8
4.8

Authorized for Public Release

Unemployment
PCE
rate
infation

Page 6 of 40

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

Core PCE
infation

Federal
funds rate
2.75
3.50
3.00
2.75
2.25
2.50
2.75
2.50
3.00
2.75
3.00
3.00
2.50
3.00
2.50

SEP: Compilation and Summary of Individual Economic Projections

September 19–20, 2017

Figure 1. Medians, central tendencies, and ranges of economic projections, 2017–20 and over the longer run
Percent

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

3

2

1

Actual

2012

2013

2014

2015

2016

2017

2018

2019

2020

Longer
run
Percent

Unemployment rate
8
7
6
5
4

2012

2013

2014

2015

2016

2017

2018

2019

2020

Longer
run
Percent

PCE inflation
3

2

1

2012

2013

2014

2015

2016

2017

2018

2019

2020

Longer
run
Percent

Core PCE inflation
3

2

1

2012

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.

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Page 7 of 40

SEP: Compilation and Summary of Individual Economic Projections

September 19–20, 2017

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

2017

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.

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Page 8 of 40

SEP: Compilation and Summary of Individual Economic Projections

September 19–20, 2017

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

1

Actual

0

2012

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

September projections
June projections

Lower

Broadly
similar

Number of participants

18
16
14
12
10
8
6
4
2

Higher

September projections
June projections

Weighted to
downside

Broadly
balanced

18
16
14
12
10
8
6
4
2

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.”

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Page 9 of 40

SEP: Compilation and Summary of Individual Economic Projections

September 19–20, 2017

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

2012

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
September projections
June projections

Lower

Broadly
similar

Number of participants

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

Higher

September projections
June projections

Weighted to
downside

Broadly
balanced

18
16
14
12
10
8
6
4
2

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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Page 10 of 40

SEP: Compilation and Summary of Individual Economic Projections

September 19–20, 2017

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

2012

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

September projections
June projections

Lower

Broadly
similar

Number of participants

September projections
June projections

18
16
14
12
10
8
6
4
2

Higher

Weighted to
downside

Broadly
balanced

Number of participants

Uncertainty about core PCE inflation

Broadly
similar

Weighted to
upside
Number of participants

Risks to core PCE inflation

September projections
June projections

Lower

18
16
14
12
10
8
6
4
2

18
16
14
12
10
8
6
4
2

Higher

September projections
June projections

Weighted to
downside

Broadly
balanced

18
16
14
12
10
8
6
4
2

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.”

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Page 11 of 40

SEP: Compilation and Summary of Individual Economic Projections

September 19–20, 2017

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

16

Change in real GDP
Unemployment rate
PCE Infation
Core PCE Infation

B
B
B
B

A
C
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
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

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

16

Change in real GDP
Unemployment rate
PCE Infation
Core PCE Infation

B
B
C
C

C
A
C
C

B
B
B
B

B
B
C
C

C
B
C
C

B
B
B
B

B
B
B
B

B
C
B
B

B
B
B
B

B
B
B
B

A
C
B
B

A
B
A
A

B
B
B
B

B
B
B
B

B
B
B
B

B
B
B
B

A = Weighted to upside

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September 19–20, 2017

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

2012

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.

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September 19–20, 2017

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: Full convergence of GDP growth, the unemployment rate, infation and interest rates to their
longer-run values will likely take six years or so, for two reasons. First, I anticipate a gradual rise in the neutral rate
through 2020 and beyond as productivity growth gradually picks up and the dollar depreciates modestly. Second,
the unemployment rate is likely to remain modestly below its longer-run level over the next couple of years, and
only in 2020 to begin moving back towards its sustainable level. I also anticipate that infation will run slightly
above 2 percent for a time until the unemployment rate settles back at its longer-run sustainable level.

Respondent 2: N/A
Respondent 3: I expect real GDP growth and PCE infation to converge to their longer-run rates in the next
year or two, while the unemployment rate will likely reach its longer-run rate only later. The unemployment rate
has declined below my estimate of its longer-run rate, and I expect the convergence process for the unemployment
rate to last fve or six years.
I reduced my estimate of the longer-run unemployment rate to 4.8 percent from 5.0 percent, primarily in light
of ongoing demographic changes–such as, importantly, the aging of the workforce–that exert downward pressure
on the longer-run unemployment rate.

Respondent 4: N/A
Respondent 5: N/A
Respondent 6: We continue to push past full employment. Infation is likely to be just shy of our longer run
objective at the end of next year and to rise above our objective in 2019. At that point it will be challenging to rein
the economy in without triggering a recession. I suspect that we will not have achieved full convergence even after
six years.

Respondent 7: We believe that convergence of the federal funds rate to its long-run level of 2.75 percent is
likely to take about 2 years.

Respondent 8: Given our estimate of the equilibrium unemployment rate, the economy is now operating
above potential and the underlying pace of activity suggests a signifcant risk of further undesirable overshooting
of full employment in the near term. In order to converge back to full employment, a prolonged period of growth
below potential will be needed. The historical record, however, places a signifcant probability on a “growth
recession” eventually morphing into a full-blown recession. In sum, while a purely model-driven forecast would
suggest convergence to the equilibrium unemployment rate from below around 2022, there is a nontrivial risk that
the projected soft landing will not materialize in practice.
Respondent 9: N/A
Respondent 10: The annual revisions to GDP and productivity have not led us to change our long-run
assumptions. We still assume potential GDP growth is 1.8 percent, as in the past several SEP submissions. We
also continue to judge that the longer-run normal rate of unemployment is within the range of 4 to 6 percent, with
the mode of that distribution between 4.5 and 5 percent. Given the recent trends in labor market conditions, we
set our point estimate in the lower portion of that range at 4.6 percent.

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We project that the current unemployment rate will remain modestly below its longer-run normal level through
2020. Our scenario analysis of labor fows and the historical behavior of the unemployment rate in long expansions
indicate that there is a signifcant probability that the unemployment rate will fall further below its longer-run
normal level.
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 some 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 afterwards.

Respondent 11: I anticipate that the economy will converge to my longer-run projection within 5 years.
Respondent 12: Refecting recent data, we project a temporary undershooting of infation for 2017. GDP
growth and the unemployment rate have converged to a regime characterized by low productivity growth and
a low real interest rate on short-term government debt. This regime features GDP growth of 2.0 percent, an
unemployment rate of 4.5 percent, and infation of 2.0 percent. 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
Respondent 14: N/A
Respondent 15: At this point, convergence is likely in three to four years.
Respondent 16: Our dual mandate goals are reached by 2019. However, it will take a couple more years to
achieve complete convergence to our longer-run projections. The e ects from accommodative monetary policy
will generate some overshooting of infation and undershooting of unemployment before dissipating over the longer
run.

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September 19–20, 2017

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: N/A
Respondent 2: N/A
Respondent 3: N/A
Respondent 4: N/A
Respondent 5: 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 6: Uncertainty about the appropriate path for the federal funds rate over the next few years is
unusually high, with little room for error on either side. The adverse economic consequences of any policy errors
will be felt in 2019 and, especially, 2020. At those horizons, uncertainty about the paths of real activity and infation
is elevated. At shorter horizons, however, economic uncertainty is about average.

Respondent 7: On balance, we continue to judge that the levels of uncertainty for the growth and infation
forecasts are broadly similar. Factors that previously had the potential for generating higher uncertainty – such
as large changes in government fscal and regulatory policies, global growth concerns, etc. – have receded further
since June. The e ects of Hurricanes Harvey and Irma add a good deal of uncertainty to the near-term outlook
for both growth and infation. However, the hurricanes are unlikely to have any e ect on the more fundamental
contours of the forecast.

Respondent 8: N/A
Respondent 9: N/A
Respondent 10: Ours is a quantitative judgment based on the width of the probability intervals from the
FRBNY forecast distribution for real GDP growth and core PCE infation. (We have revised our methodology
to incorporate greater use of the New York Fed Bayesian VAR and DSGE models in constructing the forecast
distribution.) The widths of these intervals are somewhat narrower than in our June SEP submission, as economic
data have been roughly consistent with our central projection and fnancial market volatility generally has been
subdued. Nevertheless, the probability intervals for real activity and core PCE infation forecasts are still broadly
in line with the SEP standard (for infation, this assessment takes into account the di erences between forecast
errors for overall consumer infation and core PCE infation).
Respondent 11: Uncertainty surrounding output growth and unemployment remains elevated by the heightened uncertainty about the course of fscal policy, regulatory reform, and trade policy. The impact on infation
uncertainty is small given how fat the Phillips curve seems to be.

Respondent 12: N/A
Respondent 13: N/A
Respondent 14: N/A

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Respondent 15: N/A
Respondent 16: 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.

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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: The lack of any slowdown to date in employment and output growth despite tighter monetary
policy by itself might suggest that the risks to real activity are weighted to the upside, but this concern is o set by
the downside risks implied by the e ective lower bound on nominal interest rates and the limitations it places on
our ability to o set adverse shocks.
A string of unexpectedly low monthly price readings, wage increases that remain subdued despite stronger
labor market conditions, and other evidence have increased my concern that returning infation to our 2 percent
goal will prove to be more diÿcult than envisioned in my baseline forecast. Hence, I now view the risks to the
infation outlook as weighted to the downside.
Respondent 2: N/A
Respondent 3: N/A
Respondent 4: N/A
Respondent 5: Risks for output and infation are weighted to the downside because the e ective lower bound
limits the ability of monetary policy to respond to adverse shocks. For the unemployment rate, there is a countervailing risk that it will fall more rapidly if the labor force participation rate resumes its downward trend. Therefore
I see the risks to unemployment as broadly balanced.

Respondent 6: While I see some potential upside from tax-policy changes, regulatory reform, and appropriate
infrastructure spending, prospects for thoughtful policy changes have faded. Meanwhile, I continue to be concerned
about the potential negative impacts of healthcare reform and immigration policies, and about tax changes that
ultimately do not create sustained improvement in GDP, but leave us with a higher level of debt to GDP at a time
when the US government is already highly leveraged. I am hopeful that trade policy, despite recent rhetoric, will
be done in a way that doesn’t dismantle logistics and other integrated supply chain arrangements which I believe
help US competiveness and employment opportunities.
Respondent 7: We see the risks to the outlook for growth as broadly balanced. Our forecast assumes a modest
impetus to growth from fscal policy in 2018; we see the odds as roughly equal that the policy process will result in
a bit more or a bit less stimulus. Similarly, the likelihood of stronger world-wide demand appears balanced against
the potential for some future weakness, most notably from a slowdown in China. With regard to infation, given
the downward adjustments we made to our infation outlook, we judge that the risks to the forecast continue to be
balanced. Once again, this was a close call. Persistently low infation readings, as well as the continued low levels
of infation compensation in fnancial markets and survey expectations, remain disconcerting. However, we feel
our forecast revisions were enough to re-center the balance of risks.
Respondent 8: Our forecast for GDP growth in the near term, smoothing through the e ects of the hurricanes,
remains upbeat. The recent behavior of the unemployment rate continues to be consistent with a low estimate of
the potential growth rate of the economy. In this context, if our real growth forecast materializes, there is the risk
that the unemployment rate may fall by more than what we are envisioning absent some improvement in potential
GDP growth.
Respondent 9: N/A

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Respondent 10: Ours is a quantitative judgment based on the di erence between the central projection and
the expected value from the New York Fed forecast distribution. With little resolution concerning U.S. fscal,
regulatory, and trade policy changes as well as notable outstanding geopolitical issues, risks remain signifcant on
both sides of the real activity outlook. Overall, as in June, they are roughly balanced over the forecast horizon.
Infation risks also remain roughly balanced throughout the forecast horizon. Longer-term infation compensation, the Michigan long-run survey infation expectations, and our SCE 3-year infation expectations remain
at low levels, consistent with continued downside risks. In addition, some measures of underlying infation have
moved down modestly since the June FOMC meeting. By contrast, global disinfationary forces appear to have
abated somewhat and fnancial conditions have eased, indicating still-signifcant upside risks. Also, the August
CPI suggests that the softer infation data in recent months largely refected transitory factors, which is consistent
with our central projection.
Respondent 11: Fiscal uncertainty remains high. Some stimulus may be forthcoming that would boost
demand, raise output growth, and lower the unemployment rate further. The magnitude and timing of any such
stimulus remains uncertain.

Respondent 12: We are answering this question variable by variable as they may be a ected by important
regime shifts.
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. We do not see the fscal and deregulation
proposals of the administration as suÿciently concrete or close enough to enactment to forecast a high productivity
regime. Such a possible switch, however, leads us to weight to the upside more rapid GDP growth. Our assessment
of the e ects of Hurricanes Harvey and Irma on output is that the negative e ects in Q3 would be reversed in Q4.
Concerning unemployment, the current unemployment 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; however, such a possibility leads us to allow for a higher unemployment
rate. On the other hand, we also see the possibility of further declines in the unemployment rate. Overall, we see
the risks as broadly 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. 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, this variable also depends on
the behavior of energy prices. We considered the e ects of Hurricanes Harvey and Irma and concluded that the
energy price increases in Q3 would likely by reversed in Q4. Overall, we see the risks as weighted to the upside.
Respondent 13: N/A
Respondent 14: N/A
Respondent 15: I continue to view the risks around my forecast as broadly balanced. This view continues to
be based on a monetary policy path that is a bit steeper than the median path in the June SEPs.
The recent hurricanes have caused loss of life, considerable property damage, and disruptions in economic
activity in Texas and Florida. Rebuilding e orts have already begun and will continue for some time to come. The
e ects are beginning to show up in some of the monthly economic indicators, and this will continue in the near term.
As a result of the hurricanes, I expect that growth will be depressed in the third quarter and boosted somewhat
over the subsequent couple of quarters. Some measures of infation will be a ected in the short-run as well, as
the prices of gasoline and other materials related to rebuilding e orts increase. I anticipate that the hurricanes
will exert little e ect on the outlook for the economy over the medium run, which is the time horizon over which
monetary policy operates.
Over the forecast horizon, there could be some form of expansionary fscal policy, but there continues to be
uncertainty about what, if anything, will be passed and the timing. My baseline forecast incorporates a small fscal
stimulus in line with the size and timing of the package assumed in the Tealbook. Like the Tealbook, my modal
expectation is for a smaller fscal package than I assumed in the June SEP, but with some o set due to increased

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federal spending and transfer payments in response to the hurricanes. My projections are not dependent on a
sizable fscal policy package; I assume only a modest increase in output growth in 2018 and 2019 due to fscal policy.
Instead, my forecast refects healthy underlying fundamentals. I see the risks due to fscal policy as being balanced.
The global outlook has improved over the last year. Some risks remain, including the weak banking system
in Italy, the continued rebalancing of the Chinese economy, vulnerabilities in emerging market economies, and
geopolitical risks. Monetary policy remains accommodative in many countries, helping to support their economies,
even if there is some gradual reduction in the level of accommodation.
At this point, I continue to see infation risks as roughly balanced and I continue to expect that infation will
gradually return to our goal of 2 percent over time. The weaker readings on infation in recent months suggest it
may take slightly longer to achieve a sustained return to 2 percent infation; I expect this goal to be met in the frst
half of 2019.
If the dynamics of infation have fundamentally changed, then I may be underestimating the persistence of
low infation, or overestimating the long-run unemployment rate. This could lead to a weaker infation forecast
relative to my modal forecast. But if the forces weighing on infation are, indeed, transitory and idiosyncratic (as
assumed), and if labor markets tighten more than I expect and nonlinear Phillips curve dynamics kick in, infation
could move higher than I expect, 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.
The risks to infation from oil prices appear balanced over the medium-run despite near-term upward pressure
from the hurricanes.
After appreciating over most of the last two and a half years, the dollar has depreciated this year. A continuation
of this depreciation poses an upside risk to my infation forecast.
Risks to fnancial stability from very low interest rates appear to be contained so far, but given the outlook and
the low level of interest rates, should we fail to remove monetary policy accommodation at an appropriate pace,
these risks would rise. Indeed, the low level of market volatility coupled with the low equity premium suggests that
these risks may be building.

Respondent 16: Risks to economic activity appear broadly balanced. We have reached our objective of
maximum sustainable employment according to a wide array of labor market measures and will be beyond full
employment for the next few years. The main uncertainty is by how much and for how long.
I no longer expect a meaningful boost to growth in 2018 and 2019 from government fscal policy initiatives.
That said, there remains some possibility of a tax cut, which is a source of upside risk to the outlook on activity.
Downside risks to the foreign economic outlook–notably in China and continental Europe– have receded
somewhat in recent months, but geopolitical concerns related to North Korea have risen.
Although the e ective lower bound somewhat constrains our ability to respond to adverse shocks, this constraint
is becoming less important given that appropriate policy calls for steady increases in the target funds rate over the
next two years.
I see infation moving very gradually to our 2 percent goal and view the risks to this forecast as balanced. On
the upside, there is a risk that an extended period of very tight labor markets may foster a more rapid increase in
infation than I assume in my forecast. On the downside, there are other factors, such as muted healthcare services
infation, which if sustained, could slow the pace of infation going forward.

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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: My assessment of appropriate monetary policy continues to rest on three assumptions. First,
keeping the unemployment rate near 4 percent–modestly below my estimate of the natural rate–will facilitate the
return to 2 percent infation over the next two years. Second, the neutral federal funds rate appears to be currently
near zero, suggesting that only a modest amount of accommodation is still in place. And third, the neutral rate is
likely to rise modestly over time as productivity growth picks up, suggesting that the federal funds rate will need
to rise in tandem in order to keep the economy from overheating.

Respondent 2: The low level of the federal funds rate has been necessary to move infation and unemployment
back toward our targets. This is likely because r* is temporarily depressed by the low rate of productivity growth
and other factors. Those factors are likely to dissipate only gradually, requiring a low federal funds rate for some
time in order to deliver an appropriate amount of accommodation.
Respondent 3: My judgment regarding the appropriate path of the federal funds rate is predicated on promoting sustainable economic growth and price stability. As the economy has reached full capacity and we have
essentially achieved price stability, I view a federal funds rate of 1.63 percent by the end of 2017 as most consistent
with keeping the economy in its current desirable state, even though it would require two additional 25 basis point
increases by the end of the year.
My forecast calls for the unemployment rate to be below its longer-run level and infation to be close to two
percent in 2017. Yet I view the appropriate level of the federal funds rate to be below my estimate of its longer-run
level in 2017. The reason is that the federal funds rate is still low despite the economy’s return to full capacity and
price stability, refecting the Committee’s past decisions, and I view a gradual path of the funds rate as important
to promote economic and fnancial stability.

Respondent 4: N/A
Respondent 5: Infation continues to come in below our 2 percent target; in fact it has been falling since
February. Even though the labor market continues to strengthen, it is not clear that we have reached maximum
employment as the labor force participation rate and employment-population 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.
I have lowered my long-run normal value for the federal funds rate because of model-based estimates that
indicate the neutral real interest rate is close to zero as well as long-term interest rates that, even after accounting
for term premiums that are notably lower than historical averages, imply a very low normal federal funds rate.

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Respondent 6: I’ve lowered my estimate of the longer-run value of the funds rate by 25 basis points, but
left my projected funds-rate path largely unchanged. Implicitly, accommodation is removed slightly faster than
before. A slightly-more-rapid removal of accommodation is appropriate, in my view, given the stronger outlook
for real growth here and abroad.
Risks to my funds-rate projections are balanced, in my view. However, my confdence that the funds-rate path
I have specifed will, in fact, prove to be appropriate is lower than usual. I am cognizant that the 10-year Treasury
yield now stands at approximately 2.2 percent. At issue is whether we can slow the economy to a sustainable rate
of growth without inverting the yield curve.
I assume that we will vote to begin scaling back reinvestment of funds from maturing Treasury and MBS
securities at this meeting. The policy change is widely expected, and I do not believe its announcement will
appreciably a ect overall fnancial conditions. Nor does the policy change have more than a very marginal e ect
on my thinking on the appropriate path for the funds rate.
Respondent 7: After updating and reviewing projections for the equilibrium federal funds rate from a range
of models, we lowered our estimate of its long-run level by 25 basis points to 2.75 percent. Our assumed path for
appropriate policy brings the federal funds rate gradually up to its long-run value by the end of 2019 and then has
the funds rate remaining at that level in 2020. Specifcally, we anticipate no additional rate hikes for the rest of
2017, followed by three rate increases per year in 2018 and 2019. We assume balance sheet normalization begins in
October of this year and proceeds according to the announced plan.
We believe this policy package represents a balanced approach to achieving both of our dual mandate objectives.
Given our projection of continued low infation, as well as uncertainty over its outlook, we think it will be appropriate
to forego increasing the funds rate further until 2018. More generally, we feel policy has work to do in order to
solidify infationary expectations symmetrically around 2 percent, which is a pre-requisite for achieving our infation
objective. That is why in 2020 we have the funds rate at only its longer-run level even though we project infation
at 2 percent and the unemployment rate 0.6 percentage point below the natural rate. This confguration should
generate some modest overshooting of 2 percent infation beyond 2020, which would reinforce the symmetry of our
infation target and mitigate the risk that infation expectations could settle in below 2 percent.

Respondent 8: We have revised our estimate of the longer-run normal value of the federal funds rate down
to 2.5 percent, from 3.0 percent in June. The lower estimate of the equilibrium federal funds rate appears to
be more consistent with the dynamics of the unemployment rate gap over the most recent period. This revision
notwithstanding, monetary policy is projected to tighten over time while still giving policymakers the opportunity
to probe for a lower equilibrium unemployment rate. The extent of probing is pushed to what, by historical
standards, is likely the limit before the probability that a soft landing will turn into a recession becomes too high.
Our federal funds rate assumption is coupled with a contraction in the SOMA portfolio starting in October of this
year.

Respondent 9: I believe that monthly annualized infation rates will average about 2 percent for the rest of
the year. Appropriate policy will be to gradually raise interest rates, beginning in December.

Respondent 10: 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.
Even though the near-term real growth outlook has improved and fnancial conditions have eased, the nearterm core infation outlook is lower and the medium-term economic outlook and balance of risks are little changed.
Consequently, our projection of the appropriate policy path is the same as in the June SEP submission: The target
FFR ranges at the end of 2017, 2018, and 2019 are 1 1/4 – 1 1/2 percent, 2 – 2 1/4 percent, and 2 3/4 – 3 percent
respectively. For 2020, we do not anticipate that further tightening of the policy stance will be needed to achieve
the FOMC’s objectives over the medium term. 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 is in the lower half
of this range due to the combination of continued fairly subdued productivity growth, low longer-term sovereign

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yields, continued indications of a global “saving glut,” and demographic factors. As reported in the response to
question 3(a) we maintained our point estimate of the nominal equilibrium rate at 2 3/4 percent. Our appropriate
policy path thus slightly overshoots the longer-run FFR.
As for the balance sheet policy, we assume that the conditions for starting the phase-out of reinvestment have
been met and that the plan outlined in June addendum to the Policy Normalization Principles and Plans will be
implemented in October.

Respondent 11: My projection for the appropriate path for the federal funds rate is unchanged from last
time. My view is that policy should adjust at a gradual pace given low productivity growth, uncertainty about the
future path of labor force participation, and infation that has been running below target for some time.

Respondent 12: We see no reason to change the target for the federal funds rate during the forecast horizon.
By 2018 all variables will have essentially converged to a regime characterized by low productivity growth and a
still low rate on short-term government debt.
Respondent 13: 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 14: In my projection, the real neutral federal funds rate rises from around zero today to 0.5
percent in the longer run. Because infation in my projection runs below the Committee’s objective, my funds rate
path is somewhat below the neutral rate for the next several years.
I have revised down my estimate of the longer-run federal funds rate because of the reduced prospects for fscal
stimulus.

Respondent 15: I continue to view a gradual upward path for the funds rate as appropriate. There is little
change to my forecast from my June projections. My infation forecast is a little bit fatter so my policy path is
slightly fatter in 2018. I believe it is appropriate to initiate our balance sheet normalization plan at the September
2017 FOMC meeting.
The near-term data will be a ected by the hurricanes, but we need to smooth through those fuctuations
and focus on the medium-run outlook. In 2018 and 2019, I project that growth will be somewhat above and the
unemployment rate will be below my estimates of their longer-run levels. I anticipate that labor compensation
measures will frm moderately, in line with the rising number of anecdotal reports of increasing wage pressures
across a range of skill groups and a variety of data showing that wage and compensation gains have been picking up
over time. However, if productivity growth remains low, these gains will likely be slower than in past expansions.
I continue to see the weaker readings on infation in recent months as largely refecting transitory factors rather
than a fallo in demand that could be putting more persistent downward pressure on infation. I view infation
expectations as reasonably stable, and this, coupled with continued strength in labor markets and ongoing economic
growth at or slightly above trend, suggests that infation will gradually increase to our goal of 2 percent over 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, I believe it will be
appropriate for the FOMC to gradually move rates up over the course of the forecast horizon, as the Committee
has been consistently communicating for some time. The gradual path allows for the types of fuctuations we’ve
seen in the data without having to change strategy. I assume that the funds rate will end 2019 at a level slightly
higher than my longer-run estimate of 3 percent, and then move down to 3 percent in 2020.
Respondent 16: The labor market is beyond full employment according to various measures of slack. Labor
markets will continue to tighten this year as the unemployment rate falls further below its natural rate before
gradually returning to its long-run steady-state value. On infation, despite some recent weakness due to transitory
factors, I expect a continued gradual increase, reaching our 2 percent objective by 2019 and a modest overshooting
in 2020. Underpinning this path is my view that the economy will continue to improve, causing it to run above
potential, and that this will contribute to upward pressure on infation.

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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, as well as by my expectations of, and uncertainty about, the
costs and benefts of continuing unconventional actions.
My fed funds path through the end of this year remains fatter than some simple rules would suggest. This
refects the fact that infation has been rising only gradually to our objective from below. Beyond the near term,
I envision a faster pace of fed funds rate normalization than predicted by fed funds futures. The fed funds rate
will reach its long-run level a bit by the end of 2018 and in 2019 to unwind the overshooting in infation and labor
market conditions. Similarly to the Tealbook, I expect the SOMA portfolio to gradually decline beginning in the
fourth quarter of this year with the reduction in reinvestments.

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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: Key factors include: a gradual pick-up in productivity growth over the next few years, similar
to that projected in the Tealbook; little change in fscal policy other than hurricane-related spending; continued
solid growth in global demand; and a gradual rise in the federal funds rate that will bring it into line with its neutral
rate sometime next year and keep in line with the (rising) neutral rate thereafter. These factors should enable
labor market conditions to strengthen a bit further before beginning to ease in 2020. A moderately tight labor
market, coupled with the assumption that infation expectations remain anchored at around 2 percent, should
enable actual infation to gradually move up 2 percent over the next two years.
On the real side, key risks include the possibility of changes in federal economic policy (including ones with
potentially adverse e ects); the risk that the lack of any slowdown in employment growth to date indicates that
the neutral rate is higher than I have judged; and the potential for a market correction given rich valuations for
corporate equities and bonds. For infation, the key risk is that returning infation to 2 percent may prove to be
more diÿcult than assumed in my model projection, possibly because the sustainable rate of unemployment is
lower than I have judged, or perhaps because infation expectations are consistent with expected PCE infation
stabilizing at less than 2 percent, as the sta assumes.

Respondent 2: N/A
Respondent 3: Modal forecast: My forecast for real GDP growth is characterized by growth near trend in the
period from 2017 to 2020. I expect Hurricanes Harvey and Irma to temporarily a ect indicators of real activity and
energy prices, with minor e ects on real GDP growth and PCE infation in 2017 and beyond. In the medium term,
as the stance of monetary policy becomes less accommodative, I expect growth to become more self-sustaining,
based on modest increases in the labor force and a moderate pace of productivity gains. I view the economy as at or
beyond full capacity, and expect the unemployment rate to remain below its longer-run level in the next few years,
before gradually moving back toward its longer-run rate. The softness in consumer prices this year appears more
persistent than initially anticipated; however, I expect core infation to rise to 2 percent next year, consistent with
real GDP above potential, tightening labor market conditions, and a lower dollar.
Uncertainty and risks: In the near term, the e ects of Hurricanes Harvey and Irma add uncertainty to the
pattern of growth in the second half of 2017. In the medium term, however, 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. A downside risk emanating from the U.S. is the possibility
that an overly expansive monetary policy could lead the unemployment rate to signifcantly undershoot its natural
level, as periods of overheating have historically often ended with a recession. In addition, an overly expansive
monetary policy would increase fnancial stability risks, which could necessitate a quicker than expected monetary
policy tightening that would raise the risk of recession. Upside risks to my forecast are related to the resilience of
the U.S. economy and the possibility of a more expansionary fscal policy stance.
Government policies: My assumption for fscal policy has not changed since June. My forecast does not assume
major changes in fscal policy because any possible changes in taxes, government spending, or regulations remain
highly uncertain. The likelihood of a more accommodative fscal policy stance, while diminished since earlier this
year, still poses upside risk for growth and infation and downside risk for the unemployment rate. I did not assume
any major changes in trade policy or immigration policy either, but view them as posing downside risk to my
forecast. Considering the risks related to government policies in the context of the array of global and domestic
risks to the outlook, I view uncertainty as broadly similar to the past 20 years and the risks around my outlook
as broadly balanced. Given that my assumptions about government policies do not imply changes in the modal
outlook or in my assessment of uncertainty and risks, they did not alter my projection for the appropriate path of
the federal funds rate.
Respondent 4: I see the path of economic activity as broadly unchanged from the June SEP. Although I am
still inclined to see the recent weakness in infation as mostly driven by transitory factors, I see somewhat greater

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risk that underlying infation my have declined. I have therefore slowed my assumed pace of policy tightening this
year as we await clearer signs on infation.

Respondent 5: The continued low level of infation and the benefts to the economy of allowing further
improvement in the labor market suggest a gradual approach to normalizing the stance of monetary policy.
I have not assumed any changes to government policies.
Respondent 6: While the recent hurricanes are likely to signifcantly a ect the pattern of quarterly growth
and near-term headline infation, I do not expect much impact on GDP growth over the second half of 2017 taken
as a whole, or on trend infation as captured, for example, by the Dallas Fed trimmed mean PCE infation rate.
A brightening overseas growth outlook and a somewhat weaker dollar should reduce the growth drag from net
exports and support continued expansion in capital investment. Consumer spending remains on a solid growth
track. Substantial oil inventories and the high price-elasticity of shale oil production reduce the danger that
continued expansion of the world economy will be choked o by sharply higher energy prices over the projections
horizon.
On infation, I assume that the cyclical forces driving infation upward eventually more than o set the secular
pricing restraint arising from new technologies that threaten traditional business models.
Monetary policy remains accommodative, and with labor-market strains increasingly in evidence it is appropriate to continue withdrawing monetary stimulus. However, in light of aging demographics leading to slowing
workforce growth, I believe that r* may stay lower for longer than is commonly recognized. A low long-run r*
will help support historically high asset valuations and limit the size of the funds-rate increase that’s required to
remove accommodation.
Transitions to sustainable, non-infationary growth are always diÿcult, but this is especially so once the
unemployment rate has fallen below the natural rate. The exact mechanisms are unclear, but probably revolve
around levels of debt, physical capital, and staÿng that suddenly become problematic–inducing sharp cutbacks in
spending and hiring–when it becomes apparent that the growth outlook must be revised downward. It sometimes
seems that the economy has only two distinct modes–(1) growth above potential and (2) recession–with very
di erent dynamics. Substantial unemployment undershoot now seems all but inevitable, and it will take unusual
skill and a good measure of luck to engineer a soft landing.

Respondent 7: We expect growth to run moderately above potential through 2020. The fundamentals
underlying private domestic fnal demand are solid. Accommodative monetary policy, a healthy labor market, and
improved household balance sheets are supporting solid gains in consumer spending, and business outlays appear
at last to be growing at a healthier pace. Our baseline scenario envisions such momentum carrying forward into
next year. We also assume growth in 2018 will be boosted about 1/4 percentage point by higher defense spending
and tax cuts. Subsequently, gradual removal of monetary accommodation is projected to return GDP growth to
its potential by 2020.
Hurricanes Harvey and Irma clearly will alter the quarterly patterns in growth over the near term. Our working
assumption is that the storms will reduce growth in the third quarter by about 3/4 percentage point and that the
recovery in activity and beginning of rebuilding e orts will add almost that amount to growth in the fourth quarter
and 1/4 percentage point to growth in early 2018. We assume total infation readings will be slightly higher in
the near term due to higher energy prices, but that there will be no measurable impact on core infation from the
hurricanes.
At 4.4 percent, the current unemployment rate is slightly below our estimate of the natural rate. We expect it
to move somewhat further below over the course of the forecast period. The unemployment rate is at 3.9 percent
in 2020 – 0.6 percentage point below the natural rate we expect to prevail at that time. (We think the natural rate
currently is 4.6 percent and will trend down to 4.5 percent by 2020.)
With unemployment projected to modestly undershoot the natural rate, resource pressures should provide
some lift to infation going forward. Furthermore, our assumption of a shallow path for policy normalization and
a strongly communicated commitment to a symmetric 2 percent infation target play critical roles in solidifying
infation expectations and helping to bring actual infation toward target. Still, the string of disappointing news
on infation has led us to assume a somewhat weaker persistent component in underlying infation, and we have
lowered our projection accordingly. We now see infation reaching only 1.7 percent next year, and not achieving
target until the end of the projection period.

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The key factors shaping uncertainty and the risks to the forecasts were discussed earlier in the risks and
uncertainty sections.

Respondent 8: Real activity rebounded noticeably in the second quarter, and the underlying pace of growth
appears to be well above potential. We continue to expect GDP growth in the second half of this year to average close
to 3 percent, with the negative impact of hurricanes this quarter being o set by faster growth in the fourth quarter.
Conditioning assumptions remain favorable, with households’ net worth higher and long-term rates lower than
anticipated. These developments, coupled with ongoing gains in employment and favorable sentiment readings,
should be consistent with solid advances in consumer spending in the near-term.
In 2018, fscal policy is expected to provide some support to disposable income at a time when the e ect on
consumption from net worth appreciation is starting to wane. Uncertainty surrounding the timing, nature, and
size of the Trump Administration’s fscal policy measures persists. As in the Tealbook, we have halved the size of
the fscal policy expansion, with the stimulus now widening the primary budget defcit by half of one percentage
point of GDP. The smaller size of the fscal stimulus is in part o set by lower interest rates and a weaker dollar.
Overall, we continue to expect the unemployment rate to reach a low of 4.0 percent by the end of 2018.
In 2019, the tightening of monetary policy brings the pace of GDP growth below potential, and thus the
unemployment rate starts to rise. We view the recent slowdown in infation as a temporary phenomenon, and
continue to expect infation to stay close to target in 2018 and beyond. The current forecast is conditioned on
another 25 bp increase in the federal funds rate in December, and four 25 bp increases in both 2018 and 2019. Our
federal funds rate assumption is coupled with a contraction in the SOMA portfolio starting in October of this year.
The projected removal of policy accommodation is more gradual than in June, refecting a lower estimate of the
equilibrium federal funds rate and a smaller fscal stimulus.
We view our current assessment of the likely size of the fscal stimulus package as providing a baseline with
risks around the GDP growth outlook that are roughly balanced. As concerns prices, there is the possibility that
the equilibrium unemployment rate is lower than what we are currently estimating. A countervailing risk is a
nonlinear response of infation associated with low levels of the unemployment rate. From a policy standpoint, it is
worth mentioning that long-term yields remain very low by historical standards, even when taking into account a
reduction in the equilibrium real rate of interest. If this pattern persists, the federal funds rate may need to increase
by more than what we are currently assuming.

Respondent 9: My basic forecast is for real GDP to grow slightly above its trend rate, 1 3/4 percent, this year
and next. I have modifed that forecast for storm e ects, lowering the growth rate by 1.2 percent in the third quarter
and raising it by 0.6 percent in each of the next two quarters. I expect that real GDP will grow at its trend rate
in 2019. And with the funds rate above its longer-run level, growth is slightly below trend in 2020. This forecast
assumes no change in fscal or other economic policies, since the prospects for signifcant change are uncertain at
this time.

Respondent 10: We project real GDP growth to average 2.7 percent over 2017H2, up from 2.2 percent in
the June SEP submission. Growth of fnal sales to domestic purchasers is projected to be a little below 2 1/2
percent, while inventory investment contributes about +0.3 percentage point to growth. On balance, net exports
are expected to be a modest drag on growth, due largely to an anticipated faster pace of growth of real imports in
Q4. With the upward revision to H2, we project real GDP growth of 2.4 percent for 2017, up from 2.1 percent in
June. Growth is then projected to slow to slightly below our assumption of the potential growth rate (1.8 percent)
over the remainder of the forecast horizon due largely to a tightening of fnancial conditions associated with the
gradual normalization of monetary policy.
In thinking about the details to this forecast, we see the fundamentals for consumer spending as remaining
solid, with strong labor market conditions prompting continued real disposable income growth, high aggregate
household wealth, and robust consumer confdence. As such, we project real PCE growth to be 2.4 percent for
this year, but then to slow to around 2 percent in 2018 and 2019 as part of the general slowing of growth, with the
personal saving rate drifting down somewhat. In the housing sector, low inventories of single-family homes and
improvements to the existing housing stock should support residential investment over the coming quarters.
Business fxed investment grew at a 7 percent annual rate over 2017H1, a signifcant improvement over the
preceding two years. However, much of that strengthening is due to the energy sector, which should fade over time
given our fat projected path for oil prices. We have raised our near-term real equipment investment projection

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since the June submission, but nonresidential structures investment is anticipated to be weaker. On balance, we
expect relatively modest growth of fxed investment over the forecast horizon, as has been a feature of this cycle.
Since June the dollar has depreciated, and we now expect the trade-weighted dollar to decline 6.1 percent in
2017. Combined with the robust growth rates for the global economy, we project stronger export growth and slower
import growth for 2017 than in June; consequently, the net export contribution to real GDP growth is now expected
to be +0.1 percentage point. However, with foreign real GDP growth projected to slow and the dollar anticipated
to appreciate in real terms, the net export growth contribution is projected to be -0.2 and -0.4 percentage point in
2018 and 2019, respectively.
As has been the case for recent submissions, we do not incorporate for now a fscal stimulus into our forecast,
as we believe that any tax reform/tax cut legislation will take longer to emerge than many reports suggest. We
therefore anticipate the growth contribution from the government sector to be essentially zero.
Through sometime in 2018H1, we expect the economy to grow somewhat above its potential rate, further
reducing labor market slack. The decline in the unemployment rate is however modest, due to frming productivity
growth and a very gradual rise of labor force participation. We have lowered our projected path of the unemployment
rate: That rate is anticipated to average 4.2 percent over 2018H1, and then rise to 4.3 percent by 2018Q4 and to
4.4 percent by 2019Q4. Average monthly gains in nonfarm payroll employment should slow from around 170,000
in 2017 to 120,000 in 2018 and 100,000 in 2019.
While core infation has slowed in recent months, we suspect that the bulk of this slowing is due to temporary
factors. The CPI data for August were consistent with this hypothesis. Nonetheless, the 2017 increase of the core
PCE price index is projected to be 1.5 percent. In light of the lower near-term path, we have reduced slightly our
projection for 2018 core PCE infation to 2.0 percent. Core infation then is projected to rise to 2.2 percent in 2019
and remain slightly above the FOMC’s longer-run objective in 2020.

Respondent 11: My forecast calls for output growth of about 2 percent over the forecast horizon. I continue to
expect that some fscal stimulus may be forthcoming over the next two years, but because the timing and magnitude
is uncertain it is not yet meaningfully a ecting my point forecast. However, I see some upside risk to output growth
and downside risk to the unemployment rate over the medium term. I expect the unemployment rate to remain
below my estimate of the natural rate over the forecast horizon as output grows at about its trend pace and the
labor force participation rate declines. Headline infation is being held down by transitory factors and as these
factors wane headline infation moves up to the 2 percent target in 2019. With gradually rising infation, near-trend
output growth, and the unemployment rate below my estimate of the natural rate, monetary policy becomes less
accommodative over the forecast horizon. However, accommodation is removed at a gradual pace in light of the
economic uncertainties surrounding fscal policy, regulatory and trade reform, productivity growth, and infation
dynamics.

Respondent 12: Our forecast continues to use a regime-based conception of outcomes for the U.S. 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. Monetary policy is regime-dependent and can be viewed as optimal given the current regime. Longer term,
the economy may visit other regimes, such as ones associated with 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, predicting
when these transitions may occur is very challenging, so we forecast the we will remain in the current regime over
the forecast horizon.
Respondent 13: My outlook consists of modestly above-trend growth over the next two years, supported by
a moderate pace of consumption and investment spending.
I see the economic impact from Hurricanes Harvey and Irma in much the same way as the Board sta does.
Relative to my baseline, third quarter growth is likely to be depressed by roughly 1/2 to a full percentage point,
o set by a similarly sized (perhaps slightly larger) increase in the fourth quarter. I do not see these events as having
a material e ect on my medium-term outlook. However, the impact on the incoming data stream adds further
noise to the task of teasing out signals on the underlying pace of economic growth.
As for infation, despite the recent soft readings, I see infation converging to target next year. Over the next
few months, the impact from the recent hurricanes will be felt in the retail price statistics, with the largest boost
to energy prices coming in September. The latest futures markets data imply that gasoline prices will return

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to their early-August levels by the end of the year. While there remains considerable uncertainty regarding any
hurricane-e ects on core infation, I have yet to mark that into my baseline outlook.
I view the risks to my growth outlook as balanced. I have not incorporated any changes in either fscal policy
or other government policies into my baseline outlook. If there are eventual changes in fscal policy, they are likely
to be, on net, expansionary in the near-to-medium term. On the other hand, it is possible that the negative e ects
from the hurricanes prove to be more persistent than what I expect.
The risks to my infation outlook are also balanced. While recent history suggests that the response of infation
to resource slack is somewhat muted, it may be more pronounced at high rates of resource utilization. On the other
hand, after a number of years with below-target infation, it is possible that infation expectations are becoming
entrenched at a level lower than is consistent with our mandate.

Respondent 14: N/A
Respondent 15: The fundamentals supporting the expansion remain favorable, including accommodative
monetary policy, household balance sheets that have improved greatly since the recession, continued improvement
in labor markets, and relatively low oil prices. Consumer and business sentiment remain positive. Consistent
with the data, business contacts report further tightening 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 has improved over the last year. Infation rates here and abroad are fuctuating
around a general upward trajectory, supported by accommodative monetary policy.
In the near term, I expect that the destruction caused by the recent hurricanes will reduce output growth in the
third quarter, while rebuilding e orts will boost growth somewhat over the subsequent couple of quarters. Some
infation measures will be elevated in the near term, refecting higher gasoline prices and other prices related to
rebuilding e orts. However, I expect that the hurricanes will have a limited impact on the overall economy over
the medium run.
In the U.S., there could be some form of expansionary fscal policy, although the details are still unknown. While
I’ve incorporated fscal policy assumptions similar to those in the Tealbook, my modal forecast is not dependent on
fscal policy; I expect that fscal stimulus will provide only a modest increase to growth over the forecast horizon.
The U.S. economy has been growing at a moderate rate and labor market conditions have strengthened over
the last year. From the standpoint of the cyclical conditions that monetary policy can address, I believe we are at
or somewhat beyond maximum employment.
While some recent readings on infation have been soft, transitory factors have played a role. Measured yearover-year, infation is notably higher than it was in 2015 and most of 2016 and is not far from our 2 percent goal.
I view infation expectations as reasonably well-anchored. This, coupled with continued strengthening in labor
market conditions and ongoing economic growth, suggests that infation will gradually move to 2 percent on a
sustained basis over the forecast horizon.
Although there is uncertainty surrounding fscal and other government policies, I view overall uncertainty as
roughly comparable to 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.
Respondent 16: The economy is expanding at a solid pace relative to the slow pace of growth in potential
output, which has pushed the unemployment rate lower. Going forward, the strength in labor market hiring, faster
wage growth, and gains in household wealth should support continued consumption growth. The climate for future
fxed business investment appears to have improved given the continued expectation of lighter regulatory burdens
and improving prospects abroad. Given the diminishing prospects for any new fscal stimulus, our modal forecast
assumes no measurable net impact on economic growth over the next few years from such initiatives. I expect the
economic disruptions from Hurricanes Harvey and Irma to be transitory. The likely hurricane impacts include a
contraction in economic activity on the order of 3/4 percentage point in the third quarter, followed by a rebound in
subsequent quarters that will add to real GDP growth a cumulative 1 to 1 1/4 percentage points. I also expect the
hurricanes to provide a small temporary boost to infation.
In this environment, I expect the economic recovery to proceed at a pace that is above potential. Output and
unemployment gaps were closed in 2016. With substantial monetary stimulus still in place, I expect these gaps to
overshoot for the next few years, leading to a gradual pickup in infation over the next few years. I expect infation
to reach our 2 percent target in 2019, and to overshoot slightly in 2020. Normalization of monetary policy will help
bring infation, growth, and unemployment back to their long-run sustainable levels by the following year or two.

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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: I have revised up my forecast for real GDP growth in 2017 and 2018 modestly since June in
response to the stronger tone of recent indicators of business investment and net exports, somewhat more favorable
fnancial conditions (mainly the dollar), and somewhat stronger foreign activity. Taking into account a somewhat
stronger outlook for GDP growth, as well as the recent sideways movement of the unemployment rate despite
continued strong employment growth, the projected path of the unemployment rate is a touch lower than before.
Although the hurricanes will cause noticeable quarter-to-quarter movements in real activity and infation, I
don’t anticipate that they will have much of an e ect on the Q4/Q4 growth rates of either real GDP or consumer
prices in 2017 and beyond. Similarly, they shouldn’t have much of an e ect on Q4 unemployment rates.

Respondent 2: N/A
Respondent 3: My forecast is largely unchanged, except for small updates that refect incoming data. I
revised down my projected path for the unemployment rate slightly in the medium term to refect both recent
improvements in labor market data and a lower longer-run unemployment rate. The downward revision in the
projected unemployment path left my estimate of the degree of resource utilization largely unchanged because I
also revised down my estimate of the longer-run unemployment rate. Hence, I have not changed my view of the
appropriate level of the federal funds rate.
Respondent 4: N/A
Respondent 5: Near-term core infation has continued to decline since the previous SEP and the economy
continues to add jobs without a notable decrease in the unemployment rate or increasing wage pressures. This
reinforces my assessment that there continues to be a signifcant amount of slack in the economy. At this point I
am concerned that the increases in the federal funds rate since late 2015 may be slowing the economy prematurely.
As a result, I think a more accommodative policy than I had projected in June is necessary and appropriate.
I have not assumed any changes to government policies.

Respondent 6: My projections assume a somewhat shallower path for r* than in March, based partly on the
belief that policies which signifcantly enhance productivity and labor-force growth are unlikely to be enacted and
partly on persistently low longer-term market yields.
In response to incoming data I have upwardly revised my near-term GDP growth projection and downwardly
revised my near-term infation projections. I’ve lowered my path for the unemployment rate to make it more
consistent with projected GDP growth.

Respondent 7: The strength in the incoming data led us to revise up our growth projection for 2017 by 0.3
percentage points. (Our adjustments for the hurricanes essentially cancel out in the Q4-to-Q4 growth number.)
In June, we had assumed a small boost to growth in 2017 from an increase in defense spending. Given legislative
developments since then, we moved those outlays into 2018 in the current projection.
Our regular post-NIPA revision review of the data led us to reduce our estimate of potential output slightly.
This change was o set in our forecast for actual growth, however, by some small upside factors. As a result,
the projected GDP gap throughout the forecast period is slightly more positive than in our June forecast. This
confguration also led to a small downward revision to our unemployment rate forecast in 2018 and 2019.
We think that some of the recent low readings on core infation were due to idiosyncratic, one-o price movements. However, we also think that there is some more meaningful signal in these data pointing to a softer underlying infationary trend. Accordingly, we brought our infation forecast down 0.1 percentage point throughout the
projection period.
In addition, as noted above, we reduced the estimated long-run level of the federal funds rate by 25 basis points
to 2.75 percent based. In accordance, we have one fewer rate increase (in 2018) in our path for appropriate policy.

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Respondent 8: The forecast has not changed materially since June, both in terms of activity and infation. As
already mentioned, however, the forecast is conditioned on a slower pace of tightening of monetary policy, which
refects a lower equilibrium federal funds rate and a smaller fscal stimulus.
Respondent 9: My projections have changed relatively little since June submission when I anticipated two
more rate increases in 2017. However, I am not shifting down my funds rate path but shifting it out in time e ectively by 3 months.

Respondent 10: Hurricanes Harvey and Irma will likely depress the Q3 growth rate somewhat. We have
introduced a 1/4 percentage point hit to the Q3 growth rate, mainly through slower PCE growth and a slower
pace of inventory investment due to production disruptions, but assume that it is made up in Q4. By comparison,
the Board sta (as of September 13) is assuming a one percentage point reduction of Q3 GDP growth due to the
hurricanes, and a modestly larger rebound in Q4. Our assessment is guided by how quickly economic activity
has rebounded following even very severe storms such as Hurricane Sandy. Indeed, a Tealbook chart indicates
that daily electronic retail spending in Texas returned to its baseline within six days of Hurricane Harvey making
landfall, similar to the experience around Hurricane Sandy. Another o setting e ect is that supplies fow into the
storm-a ected areas from non-a ected areas, likely resulting in a boost to production in non-a ected areas.
Because real GDP growth in the frst half was a little higher in H1 than we expected in June and the recent activity
data suggest stronger growth in the H2, we have raised our near-term real GDP growth projection. Nevertheless,
we still expect real growth to slow to near potential over the rest of the forecast horizon. With somewhat stronger
near-term growth, we now see a slightly lower path of the unemployment rate in the near and medium term.
The overall and core infation forecasts for 2017 are lower than they were in our June SEP submission, refecting
the soft infation data over the past several months until the August CPI. As we still judge this softness as temporary,
we project that infation will rise in the medium term and slightly overshoot the FOMC’s longer-run infation
objective in 2019 – 20. This overshoot helps to ensure that infation expectations do not begin to fall below the
objective and thus helps to achieve the Federal Reserve’s mandated objectives over the longer run.
Our assessment of the appropriate policy path is unchanged, with a mild overshoot of the longer-term policy
rate meant to ensure that the overshoot of infation and undershoot of unemployment are temporary, and the
longer-run objectives are met in the early 2020s.

Respondent 11: My forecast is largely unchanged from last time.
Respondent 12: Recent data has caused us to change our infation projections for 2017.
Respondent 13: I have marked up output growth in the second half of this year, in response to the strength
in the recent (pre-hurricanes) economic data. At the same time, I have lowered my 2017 infation projections,
refecting the continued string of soft retail price reports.
Respondent 14: As noted above, I have revised down my central forecast for fscal stimulus in the medium run.
I continue to put some weight on the prospects for a tax cut, of a size similar to that in the sta projection, although
implemented a bit later. As a consequence of these reduced prospects for tax cuts, I have revised down my path for
the federal funds rate, both in the medium and in the longer run. My forecast for GDP and the unemployment rate
are little changed from June, however, because foreign growth has strengthened and led to some easing of fnancial
conditions through currency depreciation. Also, stronger incoming data suggest more momentum in the economy,
and the lower path for the federal funds rate provides some o set.

Respondent 15: The narrative of my forecast has changed little since June. Because price and wage infation
have been moderate, I edged down my core infation forecast for 2018, but I continue to expect infation to gradually
frm over the forecast horizon.
As in the Tealbook, I have reduced the size of the e ect of expansionary fscal policy since my last SEP
submission, but fscal policy has not been an important component of my SEPs, having only a minor positive e ect
on growth over the forecast horizon.
In the near term, I expect that the destruction caused by the recent hurricanes will reduce output growth in the
third quarter, while rebuilding e orts will boost growth somewhat over the subsequent couple of quarters. Some

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September 19–20, 2017

infation measures will be elevated in the near term, refecting higher gasoline prices and other prices related to
rebuilding e orts. However, I expect that the hurricanes will have a limited impact on the overall economy over
the medium run.
I view an upward path of monetary policy as appropriate given that the unemployment rate is expected to
remain below its longer-run level and infation is projected to gradually move to our goal of 2 percent over the next
year or so. My funds rate path is slightly fatter next year compared to my June projection, refecting a slightly
weaker path for infation.

Respondent 16: Since June I have dropped my placeholder assumption that there will be any meaningful
fscal stimulus or other government policy initiatives that will a ect the economy. My modal projection now
assumes that fscal policy will not have a meaningful impact on growth. Even without additional fscal stimulus,
stronger than expected equity and labor markets should boost consumption and investment through the remainder
of the year. Additionally, the dollar has declined, reducing the drag from net exports. Therefore, my projection
for growth in this year is higher compared to June.
The hurricanes Harvey and Irma led me to make adjustments to my near term forecast of economic activity and
infation. Combining e ects from disruptions with recovery e orts and a rebound in economic activity, I expect
no e ect in my medium term projections.
My infation projection is revised down a bit for this year due to weaker than expected data in the second
quarter and July. I expect this to be mostly due to transitory factors with only a small impact on my projections
for infation in 2018 and 2019.

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September 19–20, 2017

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: Relative to my outlook, the Tealbook implicitly incorporates a much higher e ective level
of the neutral federal funds rate over the medium term, while assuming that (very) long-run real federal funds
rate is somewhat lower. The Tealbook also incorporates a higher natural rate of unemployment and assumes that
long-run infation expectations are at a lower level (that is, are below 2 percent).
Respondent 2: N/A
Respondent 3: Unlike Tealbook, my forecast does not incorporate a change in the stance of fscal policy.
Consistently, my projection for real GDP growth in 2018 is lower and my projected path for the unemployment
rate is fatter than in Tealbook.
Respondent 4: N/A
Respondent 5: My forecast for economic activity is broadly similar to the Tealbook. However, 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 now project that 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 later than in the Tealbook.
I have not assumed any changes to government policies.
Respondent 6: I am projecting somewhat weaker GDP growth this year and next than does the Tealbook, but
somewhat faster growth in 2019 and 2020. The net result is that the unemployment rate falls by almost as much as
in the Tealbook baseline. Despite a similar unemployment path, I anticipate a slightly faster increase in infation
than is forecasted by Board sta . In my view, the longer-term infation expectations relevant to wage and price
setting remain anchored at 2 percent, and infation remains fairly responsive, albeit with a lag, to labor-market
slack. Most signifcantly, I have a substantially shallower policy path than does the Tealbook. I think that the
Tealbook policy path would almost certainly trigger a recession.
Respondent 7: Our federal funds rate path is noticeably below the Tealbook over the next three years, ending
2020 at 2.75 percent. Furthermore, unlike the Tealbook, we do not overshoot the long-run level of the fed funds
rate during the projection period.
With regard to growth, in the near term, we currently have somewhat smaller e ects from Hurricane Harvey
and Irma built in to our forecast. Our projections for Q4-to-Q4 growth in 2017, 2018, and 2019 are very close to the
Tealbook’s. However, given our slightly higher assumption for potential output growth, our output gap at the end
of 2020 is about 1/2 percentage point smaller than the Tealbook’s. In terms of labor market slack, our projection
for the unemployment rate averages about 0.2 percentage point higher than the Tealbook, and we assume the
natural rate of unemployment is about 0.3 percentage point lower. Accordingly, our 3.9 percent unemployment
rate projection for 2020:Q4 undershoots the natural rate by less than in the Tealbook.
Our outlook for infation is somewhat more pessimistic than the Tealbook’s, as we feel that even with our more
accommodative path for monetary policy, actual infation will not return to target until 2020.
Respondent 8: The two forecasts are qualitatively similar. The Tealbook forecast features a somewhat faster
pace of growth relative to potential, which brings the unemployment rate down to a lower level than in our forecast.
The conditioning assumptions for monetary policy, fscal policy, households’ net worth and the dollar are similar
in the two forecasts.

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Respondent 9: The Tealbook forecast is for relatively stronger growth in the second half of 2017. I believe
that growth is currently fuctuating around the 2.1 percent average we have observed since the end of the recession.
In addition, in my projection, some of the rebound from the third quarter’s storm e ects occurs in early 2018.

Respondent 10: As in the June SEP, there are some notable di erences between the Tealbook forecast and
our projections for the key SEP variables. In part, these di erences refect divergences in some of the underlying
assumptions in the two forecasts. In particular, the Tealbook forecast incorporates a fscal stimulus in the form
of a personal income tax cut that commences in 2018Q1. As we said in our answer to 4(a), we currently do not
incorporate changes in fscal policy in our projection as there still is not enough information regarding their nature,
magnitude and timing.
Over the near term, the Tealbook assumes a larger disruption to Q3 activity from Hurricanes Harvey and Irma
than is assumed in our projection. However, both projections assume a suÿcient rebound in Q4 such that the
disruptions do not have a material e ect on 2017 growth.
The Tealbook projects faster growth in 2018 – 19 than in our outlook. Furthermore, based on its assessment
of potential GDP growth, which is below our assumption in 2017 – 20, the Tealbook path of real GDP leads to a
notably positive output gap in those years. Even though we do not calculate precise estimates of the output gap,
our assessment is that it is at most modestly positive at that time.
A major component behind the di erences between the two real GDP growth projections is consumption. The
Tealbook forecast has higher real PCE growth in 2018 – 19 than in our projection; this is a long-standing di erence
between the two forecasts, which has been exacerbated by the Tealbook’s fscal policy assumption that helps to
boost its projection of consumption growth in 2018. Another e ect of the Tealbook’s fscal policy assumption is a
projected saving rate that is above our projection in 2018 – 19.
Another notable di erence between the projections is the underlying assumptions on the longer-run natural
rate of unemployment, which the Tealbook has at 4.8 percent and we have at 4.6 percent. Combined with our growth
projections, we anticipate that unemployment will modestly undershoot its natural rate over the projection period;
in contrast, the Tealbook projects the unemployment to undershoot the longer-run natural rate signifcantly in
2018 – 20. This pattern is a counterpart of the sizable positive output gap that arises in the Tealbook forecast. The
lower unemployment rate path also contributes to higher projected payroll growth 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 very gradually to 63.0 percent in 2018 and 2019. Even though the Board
sta has raised its projected path of the participation rate, in the Tealbook this rate still declines to 62.5 percent
at end-2019. This di erence refects our assumption of some positive cyclical e ects on participation.
For infation, the two forecasts di er notably. We see infation rising to 2 percent in 2018 and modestly above
that level in 2019 – 20 before returning to objective early in the next decade. In contrast, the Tealbook projects
core infation to reach 2 percent in 2019, despite a sizable undershooting of unemployment, and then running
persistently above that level in the early 2020s. The considerable persistence of infation and the fat Phillips
curve within the Tealbook framework appear to require a prolonged period of above-potential growth in order to
induce infation to rise toward the longer-run infation goal. As mentioned previously, the overshoot of infation
in our projection occurs to prevent infation expectations from falling 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 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 now 25bps above that of the Tealbook: As we have not incorporated a fscal policy
stimulus in our forecast to this point, we did not have to make fscal policy adjustment to r* as the Tealbook did.
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 11: I have not included a fscal stimulus package in my forecast due to uncertainties about timing
and magnitude. My path for appropriate monetary policy remains more accommodative than the Tealbook over
the forecast horizon.

Respondent 12: For GDP growth and infation, our projections are quite similar to those in the Tealbook.
Di erences arise 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

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September 19–20, 2017

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 those regimes are quite 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 forecast also has a substantial undershooting of the unemployment rate before returning to its longer-run
value of 4.8 percent.

Respondent 13: My projection for cumulative real GDP growth over the forecast horizon is similar to the
Tealbook, though I project slower growth in the short-run and stronger growth in 2020. My projection has a
higher long-run growth trend owing to a somewhat stronger productivity assumption. Unlike the Tealbook, I am
not forecasting a decline in the unemployment rate in 2018 due to my somewhat lower projection for employment
growth next year and my somewhat higher projection for the labor force participation rate.
Respondent 14: N/A
Respondent 15: As in the Tealbook, I expect that the economy will grow at a moderate pace, labor market
conditions will continue to strengthen, and infation will gradually rise to our 2 percent goal. The infation and
labor market dynamics in my outlook di er from those in Tealbook: our infation paths are similar but I do not
project as great a fall in the unemployment rate. Thus, compared to the Tealbook, I see infation somewhat better
anchored at target and see somewhat stronger infationary pressures. On balance, my funds rate path over the
next two years is similar to that in the Tealbook. My fscal policy assumptions are similar to those in the Tealbook,
but there is considerable uncertainty around those assumptions.
Respondent 16: The Tealbook projects a more substantial and protracted overshooting of full employment,
with the unemployment rate declining to 3.7 percent at the end of 2019, and with infation returning to the 2
percent target only very gradually. In my projection, there is more modest overshooting of unemployment and
output through 2019, and those gaps close in the following year or two. Despite strong fnancial conditions, I am
not seeing much evidence in the data that this is translating into higher growth in consumer or business spending.
I see the unemployment rate bottoming out at 3.9 percent by the third quarter of next year.
The Tealbook continues to factor in fscal stimulus for the frst half of 2018. In my projections I do not expect
fscal policy to lead to a change in growth.
The gradual removal of monetary policy accommodation tightens fnancial conditions over time and slows
growth to below potential in 2019. This pushes up the unemployment rate to 4.2 percent 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. Tighter monetary policy brings infation back to target
and unemployment close to its long-run sustainable level in 2020.

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September 19–20, 2017

Figure 3.A. Distribution of participants’ projections for the change in real GDP, 2017–20 and over the longer run
Number of participants

2017

September and June
Tealbook

September projections
June projections

1.2 1.3

1.4 1.5

1.6 1.7

1.8 1.9

2.0 2.1

2.2 2.3

2.4 2.5

18
16
14
12
10
8
6
4
2
2.6 2.7

Percent range
Number of participants

2018

September and June
Tealbook

1.2 1.3

1.4 1.5

1.6 1.7

1.8 1.9

2.0 2.1

2.2 2.3

18
16
14
12
10
8
6
4
2
2.4 2.5

2.6 2.7

Percent range
Number of participants

2019

September and June
Tealbook

1.2 1.3

1.4 1.5

1.6 1.7

1.8 1.9

18
16
14
12
10
8
6
4
2
2.0 2.1

2.2 2.3

2.4 2.5

2.6 2.7

Percent range
Number of participants

2020

1.2 1.3

June
Tealbook

September
Tealbook

1.4 1.5

1.6 1.7

18
16
14
12
10
8
6
4
2
1.8 1.9

2.0 2.1

2.2 2.3

2.4 2.5

2.6 2.7

Percent range
Number of participants

Longer run

18
16
14
12
10
8
6
4
2

September and June
Tealbook

1.2 1.3

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

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September 19–20, 2017

Figure 3.B. Distribution of participants’ projections for the unemployment rate, 2017–20 and over the longer run
Number of participants

2017

September and June
Tealbook

September projections
June projections

3.6 3.7

3.8 3.9

4.0 4.1

4.2 4.3

18
16
14
12
10
8
6
4
2
4.4 4.5

4.6 4.7

4.8 4.9

5.0 5.1

Percent range
Number of participants

2018

18
16
14
12
10
8
6
4
2

September and June
Tealbook

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
September
Tealbook

June
Tealbook

3.6 3.7

3.8 3.9

18
16
14
12
10
8
6
4
2
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

3.6 3.7

September
Tealbook

June
Tealbook

3.8 3.9

4.0 4.1

18
16
14
12
10
8
6
4
2
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

3.6 3.7

September and June
Tealbook

3.8 3.9

4.0 4.1

4.2 4.3

4.4 4.5

4.6 4.7

4.8 4.9

18
16
14
12
10
8
6
4
2
5.0 5.1

Percent range

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

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September 19–20, 2017

Figure 3.C. Distribution of participants’ projections for PCE inflation, 2017–20 and over the longer run
Number of participants

2017 September and June

September projections
June projections

Tealbook

1.5 1.6

1.7 1.8

1.9 2.0

18
16
14
12
10
8
6
4
2

2.1 2.2

Percent range
Number of participants

2018

1.5 1.6

September
Tealbook

June
Tealbook

1.7 1.8

1.9 2.0

18
16
14
12
10
8
6
4
2
2.1 2.2

Percent range
Number of participants

2019

September and June
Tealbook

1.5 1.6

1.7 1.8

1.9 2.0

18
16
14
12
10
8
6
4
2
2.1 2.2

Percent range
Number of participants

2020

1.5 1.6

1.7 1.8

September
Tealbook

June
Tealbook

1.9 2.0

2.1 2.2

18
16
14
12
10
8
6
4
2

Percent range
Number of participants

Longer run

September and June
Tealbook

1.5 1.6

1.7 1.8

1.9 2.0

18
16
14
12
10
8
6
4
2
2.1 2.2

Percent range

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

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September 19–20, 2017

Figure 3.D. Distribution of participants’ projections for core PCE inflation, 2017–20
Number of participants

2017

September and June
Tealbook

1.3 1.4

1.5 1.6

September projections
June projections

1.7 1.8

1.9 2.0

18
16
14
12
10
8
6
4
2

2.1 2.2

Percent range
Number of participants

2018

September and June
Tealbook

1.3 1.4

1.5 1.6

1.7 1.8

1.9 2.0

18
16
14
12
10
8
6
4
2
2.1 2.2

Percent range
Number of participants

2019

September and June
Tealbook

1.3 1.4

1.5 1.6

1.7 1.8

1.9 2.0

18
16
14
12
10
8
6
4
2
2.1 2.2

Percent range
Number of participants

2020

1.3 1.4

1.5 1.6

1.7 1.8

September
Tealbook

June
Tealbook

1.9 2.0

2.1 2.2

18
16
14
12
10
8
6
4
2

Percent range

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

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September 19–20, 2017

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, 2017–20 and over the longer run
Number of participants

2017
September projections
June projections

September and June
Tealbook

1.13 1.37

1.38 1.62

1.63 1.87

1.88 2.12

2.13 2.37

2.38 2.62

2.63 2.87

2.88 3.12

3.13 3.37

3.38 3.62

3.63 3.87

3.88 4.12

18
16
14
12
10
8
6
4
2
4.13 4.37

Percent range
Number of participants

2018

September and June
Tealbook

1.13 1.37

1.38 1.62

1.63 1.87

1.88 2.12

2.13 2.37

2.38 2.62

2.63 2.87

2.88 3.12

18
16
14
12
10
8
6
4
2
3.13 3.37

3.38 3.62

3.63 3.87

3.88 4.12

4.13 4.37

Percent range
Number of participants

2019

September
Tealbook

18
16
14
12
10
8
6
4
2

June
Tealbook

1.13 1.37

1.38 1.62

1.63 1.87

1.88 2.12

2.13 2.37

2.38 2.62

2.63 2.87

2.88 3.12

3.13 3.37

3.38 3.62

3.63 3.87

3.88 4.12

4.13 4.37

Percent range
Number of participants

2020

1.13 1.37

September
Tealbook

1.38 1.62

1.63 1.87

1.88 2.12

2.13 2.37

2.38 2.62

2.63 2.87

2.88 3.12

3.13 3.37

3.38 3.62

3.63 3.87

3.88 4.12

18
16
14
12
10
8
6
4
2
4.13 4.37

Percent range
Number of participants

Longer run
September
Tealbook

1.13 1.37

1.38 1.62

1.63 1.87

1.88 2.12

2.13 2.37

2.38 2.62

18
16
14
12
10
8
6
4
2

June
Tealbook

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

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