Minutes of the Federal Open Market Committee
April 29-30, 2008
FOMC Minutes | Summary of Economic Projections
In conjunction with the April 2008 FOMC meeting, the members of the Board of Governors and the presidents of the Federal Reserve Banks, all of whom participate in the deliberations of the FOMC, provided projections for the rates of economic growth, unemployment, and inflation in 2008, 2009, and 2010. Projections were based on information available through the conclusion of the April meeting, on each participant's assumptions regarding a range of factors likely to affect economic outcomes, and on his or her assessment of appropriate monetary policy. "Appropriate monetary policy" is defined as the future policy that, based on current information, is deemed most likely to foster outcomes for economic activity and inflation that best satisfy the participant's interpretation of the Federal Reserve's dual objectives of maximum employment and price stability.
The projections, which are summarized in table 1 and chart 1, suggest that FOMC participants expected economic growth to be much weaker in 2008 than last year, owing primarily to a continued contraction of housing activity, a reduction in the availability of household and business credit, and rising energy prices. The unemployment rate was expected to increase significantly. However, output growth further ahead was projected to pick up by enough to begin to reverse some of the increase in the unemployment rate by 2010. In light of the recent surge in the prices of oil and other commodities, inflation was expected to remain elevated in 2008. Inflation was projected to moderate in 2009 and 2010 as the prices of crude oil and other commodities level out and economic slack damps cost and price pressures. Most participants judged that the uncertainty around their projections for both output growth and inflation was greater than normal. Most viewed the risks to output as weighted to the downside. Participants were roughly evenly divided as to whether the risks to the inflation outlook are broadly balanced or skewed to the upside.
The Outlook
The central tendency of participants' projections for real GDP growth in 2008, at 0.3 to 1.2 percent, was considerably lower than the central tendency of the projections provided in conjunction with the January FOMC meeting, which was 1.3 to 2.0 percent. Participants viewed activity as likely to be particularly weak in the first half of 2008; some rebound was anticipated in the second half of the year. Incoming data on spending and employment already indicated a softening economy this year. Real incomes were being held down by higher oil prices; falling house prices had reduced household wealth; and households and businesses were facing tighter credit conditions. Exports were seen as a notable source of strength this year owing to continued economic growth overseas and the depreciation of the dollar over the past year or so. Many participants also said that the substantial easing of monetary policy since last year and the fiscal stimulus package should help to support spending in the second half of the year. Beyond 2008, factors projected to buoy economic growth included the continued effects of an accommodative stance of monetary policy in conjunction with a gradual easing of financial market strains, a stabilization in housing markets, and a leveling-off of oil and commodity prices. Participants were encouraged by steps taken at major financial institutions to bolster their balance sheets and to raise new capital. Some expressed the view that financial market sentiment may have swung excessively to the pessimistic side, and that risk spreads would come down and credit would become more available as risk aversion diminishes. Also, demand and supply in the housing market should become better aligned as the decline in house prices increases the affordability of homeownership and the decline in housing starts reduces the supply of new homes. Most participants expected real GDP to grow roughly at their estimates of its trend rate in 2009 and somewhat above trend in 2010.
With output growth well below trend this year, most participants expected that the unemployment rate would move up. The central tendency of participants' projections for the average rate of unemployment in the fourth quarter of 2008 was 5.5 to 5.7 percent, above the 5.2 to 5.3 percent unemployment rate forecasted in January and consistent with significant slack in labor markets and the economy. Most participants expected the unemployment rate to edge down in 2009 and 2010.
The steep run-up in the prices of oil and other commodities since January was the primary factor leading participants to revise up sharply their projections for overall inflation in the near term. In contrast, the central tendencies of the projections for core PCE inflation in 2008 increased only moderately, from 2.0 to 2.2 percent in January to 2.2 to 2.4 percent in April, reflecting the effects of higher food and energy prices on other goods and services and the rise in import prices associated with the decline in the dollar and higher inflation in our trading partners.
Rates of both overall and core inflation were expected to decline over the next two years, reflecting a flattening out of the prices of oil and other commodities consistent with futures market prices and the effects of significant economic slack. Participants' projections for 2010 were importantly influenced by their judgments about the measured rates of inflation consistent with the Federal Reserve's dual mandate to promote maximum employment and price stability and about the time frame over which policy should aim to attain those rates given current economic conditions. Many participants judged that, given the recent adverse shocks to both aggregate demand and inflation, policy would be able to foster only a gradual return of key macroeconomic variables to their longer-run sustainable or optimal levels. Consequently, the rate of unemployment was projected by many participants to remain above its longer-run sustainable level even in 2010, and inflation was viewed likely still to be a bit above levels that some participants judged would be consistent with the Federal Reserve's dual mandate.
Table 1: Economic Projections of Federal Reserve Governors and Reserve Bank Presidents
(Percent) 2008 2009 2010
Central Tendency1
Growth of real GDP 0.3 to 1.2 2.0 to 2.8 2.6 to 3.1
January projections 1.3 to 2.0 2.1 to 2.7 2.5 to 3.0
Unemployment rate 5.5 to 5.7 5.2 to 5.7 4.9 to 5.5
January projections 5.2 to 5.3 5.0 to 5.3 4.9 to 5.1
PCE inflation 3.1 to 3.4 1.9 to 2.3 1.8 to 2.0
January projections 2.1 to 2.4 1.7 to 2.0 1.7 to 2.0
Core PCE inflation 2.2 to 2.4 1.9 to 2.1 1.7 to 1.9
January projections 2.0 to 2.2 1.7 to 2.0 1.7 to 1.9
Range2
Growth of real GDP 0.0 to 1.5 1.8 to 3.0 2.0 to 3.4
January projections 1.0 to 2.2 1.8 to 3.2 2.2 to 3.2
Unemployment rate 5.3 to 6.0 5.2 to 6.3 4.8 to 5.9
January projections 5.0 to 5.5 4.9 to 5.7 4.7 to 5.4
PCE inflation 2.8 to 3.8 1.7 to 3.0 1.5 to 2.0
January projections 2.0 to 2.8 1.7 to 2.3 1.5 to 2.0
Core PCE inflation 1.9 to 2.5 1.7 to 2.2 1.3 to 2.0
January projections 1.9 to 2.3 1.7 to 2.2 1.4 to 2.0
Note: Projections of the growth of real GDP, of PCE inflation, and of core PCE inflation are percent changes from the fourth quarter of the previous year to the fourth quarter of the year indicated. PCE inflation and core PCE inflation are the percentage rates of change in, respectively, the price index for personal consumption expenditures and the price index for personal consumption expenditures excluding food and energy. Projections for the unemployment rate are for the average civilian unemployment rate in the fourth quarter of the year indicated. Each participant's projections are based on his or her assessment of appropriate monetary policy.
1. The central tendency excludes the three highest and three lowest projections for each variable in each year.
2. The range for a variable in a given year includes all participants' projections, from lowest to highest, for that variable in that year.
※출처: Federal Reserve
April 29-30, 2008
FOMC Minutes | Summary of Economic Projections
In conjunction with the April 2008 FOMC meeting, the members of the Board of Governors and the presidents of the Federal Reserve Banks, all of whom participate in the deliberations of the FOMC, provided projections for the rates of economic growth, unemployment, and inflation in 2008, 2009, and 2010. Projections were based on information available through the conclusion of the April meeting, on each participant's assumptions regarding a range of factors likely to affect economic outcomes, and on his or her assessment of appropriate monetary policy. "Appropriate monetary policy" is defined as the future policy that, based on current information, is deemed most likely to foster outcomes for economic activity and inflation that best satisfy the participant's interpretation of the Federal Reserve's dual objectives of maximum employment and price stability.
The projections, which are summarized in table 1 and chart 1, suggest that FOMC participants expected economic growth to be much weaker in 2008 than last year, owing primarily to a continued contraction of housing activity, a reduction in the availability of household and business credit, and rising energy prices. The unemployment rate was expected to increase significantly. However, output growth further ahead was projected to pick up by enough to begin to reverse some of the increase in the unemployment rate by 2010. In light of the recent surge in the prices of oil and other commodities, inflation was expected to remain elevated in 2008. Inflation was projected to moderate in 2009 and 2010 as the prices of crude oil and other commodities level out and economic slack damps cost and price pressures. Most participants judged that the uncertainty around their projections for both output growth and inflation was greater than normal. Most viewed the risks to output as weighted to the downside. Participants were roughly evenly divided as to whether the risks to the inflation outlook are broadly balanced or skewed to the upside.
The Outlook
The central tendency of participants' projections for real GDP growth in 2008, at 0.3 to 1.2 percent, was considerably lower than the central tendency of the projections provided in conjunction with the January FOMC meeting, which was 1.3 to 2.0 percent. Participants viewed activity as likely to be particularly weak in the first half of 2008; some rebound was anticipated in the second half of the year. Incoming data on spending and employment already indicated a softening economy this year. Real incomes were being held down by higher oil prices; falling house prices had reduced household wealth; and households and businesses were facing tighter credit conditions. Exports were seen as a notable source of strength this year owing to continued economic growth overseas and the depreciation of the dollar over the past year or so. Many participants also said that the substantial easing of monetary policy since last year and the fiscal stimulus package should help to support spending in the second half of the year. Beyond 2008, factors projected to buoy economic growth included the continued effects of an accommodative stance of monetary policy in conjunction with a gradual easing of financial market strains, a stabilization in housing markets, and a leveling-off of oil and commodity prices. Participants were encouraged by steps taken at major financial institutions to bolster their balance sheets and to raise new capital. Some expressed the view that financial market sentiment may have swung excessively to the pessimistic side, and that risk spreads would come down and credit would become more available as risk aversion diminishes. Also, demand and supply in the housing market should become better aligned as the decline in house prices increases the affordability of homeownership and the decline in housing starts reduces the supply of new homes. Most participants expected real GDP to grow roughly at their estimates of its trend rate in 2009 and somewhat above trend in 2010.
With output growth well below trend this year, most participants expected that the unemployment rate would move up. The central tendency of participants' projections for the average rate of unemployment in the fourth quarter of 2008 was 5.5 to 5.7 percent, above the 5.2 to 5.3 percent unemployment rate forecasted in January and consistent with significant slack in labor markets and the economy. Most participants expected the unemployment rate to edge down in 2009 and 2010.
The steep run-up in the prices of oil and other commodities since January was the primary factor leading participants to revise up sharply their projections for overall inflation in the near term. In contrast, the central tendencies of the projections for core PCE inflation in 2008 increased only moderately, from 2.0 to 2.2 percent in January to 2.2 to 2.4 percent in April, reflecting the effects of higher food and energy prices on other goods and services and the rise in import prices associated with the decline in the dollar and higher inflation in our trading partners.
Rates of both overall and core inflation were expected to decline over the next two years, reflecting a flattening out of the prices of oil and other commodities consistent with futures market prices and the effects of significant economic slack. Participants' projections for 2010 were importantly influenced by their judgments about the measured rates of inflation consistent with the Federal Reserve's dual mandate to promote maximum employment and price stability and about the time frame over which policy should aim to attain those rates given current economic conditions. Many participants judged that, given the recent adverse shocks to both aggregate demand and inflation, policy would be able to foster only a gradual return of key macroeconomic variables to their longer-run sustainable or optimal levels. Consequently, the rate of unemployment was projected by many participants to remain above its longer-run sustainable level even in 2010, and inflation was viewed likely still to be a bit above levels that some participants judged would be consistent with the Federal Reserve's dual mandate.
Table 1: Economic Projections of Federal Reserve Governors and Reserve Bank Presidents
(Percent) 2008 2009 2010
Central Tendency1
Growth of real GDP 0.3 to 1.2 2.0 to 2.8 2.6 to 3.1
January projections 1.3 to 2.0 2.1 to 2.7 2.5 to 3.0
Unemployment rate 5.5 to 5.7 5.2 to 5.7 4.9 to 5.5
January projections 5.2 to 5.3 5.0 to 5.3 4.9 to 5.1
PCE inflation 3.1 to 3.4 1.9 to 2.3 1.8 to 2.0
January projections 2.1 to 2.4 1.7 to 2.0 1.7 to 2.0
Core PCE inflation 2.2 to 2.4 1.9 to 2.1 1.7 to 1.9
January projections 2.0 to 2.2 1.7 to 2.0 1.7 to 1.9
Range2
Growth of real GDP 0.0 to 1.5 1.8 to 3.0 2.0 to 3.4
January projections 1.0 to 2.2 1.8 to 3.2 2.2 to 3.2
Unemployment rate 5.3 to 6.0 5.2 to 6.3 4.8 to 5.9
January projections 5.0 to 5.5 4.9 to 5.7 4.7 to 5.4
PCE inflation 2.8 to 3.8 1.7 to 3.0 1.5 to 2.0
January projections 2.0 to 2.8 1.7 to 2.3 1.5 to 2.0
Core PCE inflation 1.9 to 2.5 1.7 to 2.2 1.3 to 2.0
January projections 1.9 to 2.3 1.7 to 2.2 1.4 to 2.0
Note: Projections of the growth of real GDP, of PCE inflation, and of core PCE inflation are percent changes from the fourth quarter of the previous year to the fourth quarter of the year indicated. PCE inflation and core PCE inflation are the percentage rates of change in, respectively, the price index for personal consumption expenditures and the price index for personal consumption expenditures excluding food and energy. Projections for the unemployment rate are for the average civilian unemployment rate in the fourth quarter of the year indicated. Each participant's projections are based on his or her assessment of appropriate monetary policy.
1. The central tendency excludes the three highest and three lowest projections for each variable in each year.
2. The range for a variable in a given year includes all participants' projections, from lowest to highest, for that variable in that year.
※출처: Federal Reserve
