A short thread on a few new items from the Fed's the 2016 FOMC transcripts:
Previously, the Fed released the "key" identifying the individual projections from the Summary of Economic Projections after a 10 year delay. In 2016, the FOMC agreed to do this after just 5 years.
Previously, the Fed released the "key" identifying the individual projections from the Summary of Economic Projections after a 10 year delay. In 2016, the FOMC agreed to do this after just 5 years.
(They didn't do this retroactively, so the names from previous years will still be released after 10 years).
The upshot is we can now see where half of current FOMC participants thought the unobserved variables like r-star and u-star were as of their Dec 2016 view of the economy
The upshot is we can now see where half of current FOMC participants thought the unobserved variables like r-star and u-star were as of their Dec 2016 view of the economy
Back then, the unemployment rate had most recently been reported at 4.6%. Only one participant (Evans) thought the natural rate was lower.
Most officials, including Powell and Yellen, estimated a neutral fed-funds rate at 2.75%.
Most officials, including Powell and Yellen, estimated a neutral fed-funds rate at 2.75%.
The SEP is often cited as a Fed "projection" or "forecast." But it is only a projection of each participant's view of "appropriate policy" under the most likely, or baseline, economic scenario.
Officials are telling a story. If X happens with the economy, policy should do Y.
Officials are telling a story. If X happens with the economy, policy should do Y.
With that context, what story were officials telling with their projections in Dec. 16?
Most thought unemployment would fall a little bit, but not a lot, below their estimate of the natural rate; and inflation would rise to but not overshoot 2% because they would raise rates.
Most thought unemployment would fall a little bit, but not a lot, below their estimate of the natural rate; and inflation would rise to but not overshoot 2% because they would raise rates.
Looking ahead two years (to 2018), only two officials projected core inflation rising above their 2% target. (It ended the year at 2.056%).
Officials ended up raising rates roughly in line with what they had projected, give or take one or two quarter-point increases.
Officials ended up raising rates roughly in line with what they had projected, give or take one or two quarter-point increases.
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