Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Fed "Downgrades" GDP Growth Forecasts

By Justin Loiseau - Mar 19, 2014 at 5:20PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Unemployment rates expected to dip -- but that might not mean much.

The Federal Reserve is more reserved about the future, according to economic projections released (link opens as PDF) today.

Excluding the three highest and lowest projections of Federal Reserve Open Market Committee members, the "central tendency" range for 2014 growth got a haircut, dropping from December's 2.8%-3.2% estimate to a current 2.8%-3% prediction. Projects for 2015 and 2016 saw 0.2 percentage points pulled off, as well, with longer run estimates evening out to between 2.2% and 2.3% growth.

Source: Federal Reserve.

Unemployment rate estimates dipped lower, but that might not mean much. While 2014 central tendency estimates now run between 6.1% to 6.3%, compared with 6.3% to 6.6% last December, the Fed is placing less importance on this metric.

In a concurrent announcement today, the Reserve noted that a 6.5% unemployment rate will no longer serve as a threshold for its monetary actions, in part because it can be easily swayed by ups and downs in labor force participation.

Over the long term, the Fed ultimately expects the unemployment rate to even out somewhere in the range of 5.2% to 5.6%.

Source: Federal Reserve.

Inflation projections are relatively unchanged from December's predictions, although 2014 estimates did add on 0.1 percentage points to its lower bound, putting new central tendency projections between 1.5% and 1.6%. While it's not much, it should allow deflation worriers to sleep slightly better tonight. In the longer run, the Fed would eventually like to see inflation pick up to 2.0%.

Source: Federal Reserve.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
640%
 
S&P 500 Returns
139%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/03/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.