by Calculated Risk on 8/27/2023 09:52:00 AM

The next FOMC meeting will be held on September 19th and 20th. Projections will be released at this meeting.  For review, here are the June projections.

Since the last projections were released in June, the economy has performed better than the FOMC expected, and inflation was slightly below expectations.

The BEA reported that real GDP increased at a 2.4% annual rate in Q2, after increasing at a 2.0% rate in Q1.  Tracking estimates suggest real GDP will likely increase around 2.7% annualized in Q3. It appears the FOMC projections for year-over-year growth in Q4 2023 will be revised up sharply.

GDP projections of Federal Reserve Governors and Reserve Bank presidents, Change in Real GDP1
Projection Date	2023	2024	2025
June 2023	0.7 to 1.2	0.9 to 1.5	1.6 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 3.5% in July and the consensus estimate is that the unemployment rate was unchanged in August (to be released Friday, September 1st).  To reach the mid-point of the FOMC projections for Q4 2023, the economy would have to lose a significant number of jobs over the last several months of 2023.   The FOMC's unemployment rate projection for Q4 will likely be revised down.

Unemployment projections of Federal Reserve Governors and Reserve Bank presidents, Unemployment Rate2
Projection Date	2023	2024	2025
June 2023	4.0 to 4.3	4.3 to 4.6	4.3 to 4.6

² Projections for the unemployment rate are for the average civilian unemployment rate in the fourth quarter of the year indicated.

As of June 2023, PCE inflation increased 3.0 percent year-over-year (YoY), down from 3.8 percent YoY in May, and down from the recent peak of 7.0 percent in June 2022.  However, a year ago, July 2022 PCE inflation was slightly negative for the month, so YoY PCE inflation will likely increase in July (to be released this coming Thursday, Aug 31st).

PCE inflation was strong last year in the August to October period - increasing at a 4.2% annual rate - and YoY PCE inflation will likely be revised down at the September meeting.  

Inflation projections of Federal Reserve Governors and Reserve Bank presidents, PCE Inflation1
Projection Date	2023	2024	2025
June 2023	3.0 to 3.5	2.3 to 2.8	2.0 to 2.4

PCE core inflation increased 4.1 percent YoY in June, down from 4.6 percent in May, and down from the recent peak of 5.4 percent in February 2022.  However, a year ago, July 2022 core PCE inflation was low, so YoY PCE inflation will likely increase in July.

Core PCE inflation increased sharply in September and October last year - at a 6.3% annual rate - and YoY measures of core PCE will likely decline in September and October.  Core inflation remains a concern for the FOMC, however this includes shelter that was up 8.0% YoY in June (even though asking rents are slightly negative YoY).   Core PCE inflation for Q4 will likely be revised down slightly in the next FOMC projections.

Core Inflation projections of Federal Reserve Governors and Reserve Bank presidents, Core Inflation1
Projection Date	2023	2024	2025
June 2023	3.7 to 4.2	2.5 to 3.1	2.0 to 2.4