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FOMC Preview

Summary:
The consensus is that there will no change in policy at the FOMC meeting this week, but that the Fed might take a more dovish tone (and possibly even remove the word "patience") - and possibly hint at a rate cut later this year (perhaps as insurance).Note that Goldman Sachs chief economist Jan Hatzius wrote today: "A Skeptical View of Insurance Cuts". Hatzius thinks the Fed will remain data dependent (any rate cut will be based on the data), and not cut rates as "insurance".There might some revisions in the economic projections, especially for inflation.Here are the March FOMC projections.Q1 real GDP growth was at 3.1% annualized, and most analysts are projecting around 2% in Q2.  So the GDP projections will probably be little changed.GDP projections of Federal Reserve Governors and

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The consensus is that there will no change in policy at the FOMC meeting this week, but that the Fed might take a more dovish tone (and possibly even remove the word "patience") - and possibly hint at a rate cut later this year (perhaps as insurance).

Note that Goldman Sachs chief economist Jan Hatzius wrote today: "A Skeptical View of Insurance Cuts". Hatzius thinks the Fed will remain data dependent (any rate cut will be based on the data), and not cut rates as "insurance".

There might some revisions in the economic projections, especially for inflation.

Here are the March FOMC projections.

Q1 real GDP growth was at 3.1% annualized, and most analysts are projecting around 2% in Q2.  So the GDP projections will probably be little changed.

GDP projections of Federal Reserve Governors and Reserve Bank presidents
Change in
Real GDP1
201920202021
Mar 20191.9 to 2.21.8 to 2.01.7 to 2.0
Dec 20182.3 to 2.51.8 to 2.01.5 to 2.0
1 Projections of change in real GDP and inflation are from the fourth quarter of the previous year to the fourth quarter of the year indicated.

The unemployment rate was at 3.6% in May.  The unemployment rate projection for 2019 will probably be unchanged or revised down slightly.

Unemployment projections of Federal Reserve Governors and Reserve Bank presidents
Unemployment
Rate2
201920202021
Mar 20193.6 to 3.83.6 to 3.93.7 to 4.1
Dec 20183.5 to 3.73.5 to 3.83.6 to 3.9
2 Projections for the unemployment rate are for the average civilian unemployment rate in the fourth quarter of the year indicated.

As of April 2019, PCE inflation was up 1.5% from April 2018.  This was below the projected range for 2019 and PCE inflation might be revised down for 2019.

Inflation projections of Federal Reserve Governors and Reserve Bank presidents
PCE
Inflation1
201920202021
Mar 20191.8 to 1.92.0 to 2.12.0 to 2.1
Dec 20181.8 to 2.12.0 to 2.12.0 to 2.1

PCE core inflation was up 1.6% in April year-over-year.  So the projection for core PCE for 2019 will probably be revised down.

Core Inflation projections of Federal Reserve Governors and Reserve Bank presidents
Core
Inflation1
201920202021
Mar 20191.9 to 2.02.0 to 2.12.0 to 2.1
Dec 20182.0 to 2.12.0 to 2.12.0 to 2.1

In general, GDP and the unemployment rate have been at or better than the March projections, however inflation has been softer than the March projections.

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