12/3/2023 0 Comments Fed next meeting date 2017![]() ![]() Just days ago, the FOMC announced a further rate increase-of 25 basis points to 50-75 basis points. But before we hand out forecasting prizes to the FOMC, we should consider the one projection they got quite wrong: their own actions. Those are amazingly accurate predictions in an uncertain and imperfectly understood economic environment. And the core PCE index, which the FOMC sees as better representing underlying inflation trends because it excludes volatile food and energy prices, grew 1.7 percent, at the upper end of the central tendency of FOMC projections. ![]() Total inflation as measured by the FOMC’s preferred metric (the Personal Consumption Expenditure chain price index) was 1.4 percent in the 12 months ended in October (latest data available) near the middle of the central tendency of the FOMC’s December 2015 projections of 1.2-1.7 percent. Unemployment averaged 4-3/4 percent in October and November, right in the middle of the range of projections FOMC participants made at the end of 2015. In fact, the labor market and inflation behaved very close to the FOMC’s expectations in 2016. With the unemployment rate projected to fall further and inflation to rise gradually over 2016, the question was how far that rate would need to increase this year for the FOMC to engineer a soft landing for its dual objectives of maximum employment (seen to be an unemployment rate near 4-3/4 percent) and stable prices (defined to be inflation of 2 percent.) Ultimately, the FOMC ended up raising rates just once – another quarter-percentage point – during the year. A year ago, in December 2015, the Federal Open Market Committee (FOMC) of the Federal Reserve voted to lift its policy rate by one-quarter percentage point after keeping that rate close zero for seven years as a response to the Great Recession. ![]()
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