FOMC’s forecast for interest rates, GDP and inflation

The Federal Reserve Building is pictured on Monday, March 8, 2021 in Washington.

Caroline Brehman | CQ-Roll Call, Inc. | Getty Images

The Federal Reserve met its economic growth expectations on Wednesday, but indicated that there are no expected interest rate hikes for the next two years.

The so-called dot projections have suffered little, and most members still expect to keep rates to zero until 2023.

Four of the 18 federal committee members at some point in 2022 sought an interest rate hike, compared to just one at the December meeting. For 2023, seven members see a rate hike, compared to five in the December forecast. As the graph shows, a strong majority does not predict any increases in the ‘longer term’.

FOMC members predict each quarter where interest rates will go in the short, medium and long term. These projections are visually represented in the maps below, called a dot plot.

Here are the Fed’s latest targets, announced in Wednesday’s statement:

This is what the Fed’s forecast for December 2020 looked like:

Source: Federal Reserve

The Fed estimates that the unemployment rate will fall to 4.5% in 2021, below the previous estimate of 5%. The FOMC expects the unemployment rate to fall to 3.9% and 3.5% by 2022 and 2023 respectively.

The central bank now sees inflation rising to 2.4% this year, above its previous estimate of 1.8%. The Fed also slightly increased its PCE inflation estimates for 2022 and 2023.

Core PCE inflation is expected to reach 2.2% in 2021, compared to the forecast of 1.8% in December. The core PCE for 2022 is now expected at 2.0% and 2.1% in 2023.

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