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Fed Expects Faster GDP Growth in 2014, Unemployment Rate Improvements

The Federal Reserve released its latest economic estimates (link opens in PDF) today, with more optimistic outlooks for long-term GDP growth and unemployment rates, as well as favorable levels of inflation.

Excluding the three highest and lowest projections, the "central tendency" for 2013 GDP growth dropped slightly for a 2.3%-2.6% range, compared to a 2.8% ceiling previously projected in March. However, 2014's central tendency projection for GDP change improved to 3%-3.5%, compared to previous estimates between 2.9% and 3.4%. Longer-run growth rates remain in the 2.3%-2.5% range.


Projections for the unemployment rate saw the biggest improvements, with 2013 expectations falling to 7.2%-7.3%, compared to March's 7.3%-7.5% range. It's currently 7.6%. 2014's lower-end central tendency estimate touches 6.5%, the level the Federal Reserve has previously listed as a potential pull-out point for its "highly accomodative" interest rate. By 2015, new estimates put the unemployment rate between 5.8% and 6.2%, compared to a previous central tendency estimate  between 6% and 6.5%.


Inflation, an area that has remained relatively under control through recent years, is expected to rise slowly to the Fed's target rate of 2% by 2015. The Fed said temporary factors were partly the reason inflation was running below its 2% long-run objective. It said inflation could run as low as 0.8% this year, but predicts it will pick up next year to between 1.4% and 2%.


-- Material from The Associated Press was used in this report.

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