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Comment: March Summary of Economic Projections lower than December, no more rate moves in 2018

The Summary of Economic Projections released on March 20 showed a definite slowdown in growth expectations for 2019 at 2.1%, down from 2.3% in December.

The unemployment rate is expected to creep up to to 3.7% by year-end in the current forecast, up from 3.5% in December, but still a significant undershoot of the longer-run estimate of 4.3% (down a tenth from 4.4% in December).

Inflation was also revised slightly lower, down a tenth to 1.8% for the PCE deflator, although the core PCE deflator is expected to remain on the Fed’s 2% target.

The projected midpoint for the fed funds target range was down sharply to 2.4% in March from 2.9% in December, essentially the same as the 2.375% at which it currently rests. Thus, the FOMC consensus anticipates no further rate hikes this year, and perhaps only one in 2019, and then none in 2020. The longer-run rate which roughly correlates as the neutral rate remained at 2.8% in March from December.

These are somewhat larger moves for growth and rates than normally happen between forecasts, but the downgrades were widely anticipated and will be welcome in terms of the FOMC being in agreement with the market’s assessment at present.


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