FOMC participants’ views on the economic outlook


Dec. 4 2020, Updated 10:53 a.m. ET

FOMC participants’ views on economic outlook

In conjunction with the Federal Open Market Committee (or FOMC) meeting held in the offices of the Board of Governors of the Federal Reserve System in Washington, DC, on June 17–18, the meeting participants submitted their assessments of real output growth, the unemployment rate, inflation, and the target federal funds rate for each year from 2014 through 2016 and over the longer run, under each participant’s judgment of appropriate monetary policy.

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The longer-run projections represent each participant’s assessment of the rate to which each variable would be expected to converge, over time, under appropriate monetary policy without further shocks to the economy. These economic projections and policy assessments are described in the Summary of Economic Projections (or SEP).

The performances of popular exchange-traded funds (or ETFs) like the SPDR S&P 500 ETF (SPY), the iShares Core S&P 500 ETF (IVV), and the iShares S&P 100 ETF (OEF), which track large-cap equities of companies like Apple Inc. (AAPL) and ExxonMobil Corp. (XOM), provide indications about the course of the U.S. economy.

Real GDP

Over the next two and a half years, participants expect economic activity to expand enough to lead to a further decrease in the unemployment rate to levels close to their current assessments of its longer-run normal value. Factors that are anticipated to support such economic expansion included:

  • Accommodative monetary policy
  • Diminished drag from fiscal restraint
  • Further gains in household net worth
  • Improving credit conditions for households and businesses
  • Rising employment and wages
  • Inflation expectations remained stable
  • A pickup in income, from higher wages as well as ongoing employment gains that would be expected to support a sustained rise in consumer spending
  • Capital spending was likely to increase going forward
  • Favorable financial conditions appeared be supporting economic activity

Key risks identified by the participants

Some participants viewed the low implied volatility in equity, currency, and fixed-income markets as well as signs of increased risk-taking as an indication that market participants weren’t factoring in sufficient uncertainty about the path of the economy and monetary policy.

A few participants expressed uncertainty about the outlook for economic growth in Japan and China. Also, several participants saw developments in Iraq and Ukraine as creating possible downside risks to global economic activity or potential upside risks to world oil prices.

The next section of this series will discuss the FOMC participants’ outlook for unemployment, inflation, and the current policy guidance.


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