Fed’s new economic projections are rather dovish. In short, there will be no more rate hike in this year. And the current rate hike cycle could end with interest rate below longer run rate. GDP forecasts for 2019 and 2020 are revised down. Unemployment rate for 2019, 2020, and 2021 are all revised up. Dollar dives sharply after the release.
Federal funds rates are projected to be at:
- 2.4% in 2019, revised down from 2.9%.
- 2.6% in 2020, revised down from 3.1%.
- 2.6% in 2021, revised down from 3.1%.
Median longer run rate is unchanged at 2.8%.
That is, there will be no rate hike this year. And probably just one hike in 2020 and it’s done. The current cycle could end up with interest rate below the longer run level.
GDP growth is projected to be at:
- 2.1% in 2019, revised down from 2.3%.
- 1.9% in 2020, revised down from 2.0%.
- 1.8% in 20201, unchanged.
Unemployment rate is projected to be at:
- 3.7% in 2019, revised up from 3.5%.
- 3.8% in 2020, revised up from 3.6%.
- 3.9% in 2021, revised up from 3.8%.
Core PCE inflation is projected to be at:
- 2.0% in 2019, unchanged.
- 2.0% in 2020, unchanged.
- 2.0% in 2021, unchanged.
