Fed Officials Upgrade Growth Forecasts for This Year and Next
Forex - Federal Reserve officials have revised their growth expectations upward for this year and the next; while the median interest rate forecast remains unchanged for this year, it has been increased for the following years.
According to the "Economic Projections Report" released by the Fed, the GDP forecast has been raised from 2.0% to 2.5% for 2024, and from 2.0% to 2.1% for 2025. The Fed officials maintained the 2026 forecast at 2.0% and the long-term expectation at 1.8%, while they reduced the 2027 forecast from 2.0% to 1.9%.
Fed officials retained the median interest rate forecast at 4.4% for this year, while increasing it for the next three years and the long term. Accordingly, the 2025 forecast has been raised from 3.4% to 3.9%, the 2026 forecast from 2.9% to 3.4%, the 2027 forecast from 2.9% to 3.1%, and the long-term expectation has increased from 2.9% to 3.0%.
In the Fed's projections, the core PCE expectation for this year has risen from 2.6% to 2.8%, next year's expectation from 2.2% to 2.5%, and the 2026 expectation from 2.0% to 2.2%, while the 2027 expectation remains at 2.0%.
Officials' PCE inflation expectations have increased from 2.3% to 2.4% for this year, from 2.1% to 2.5% for next year, and from 2.0% to 2.1% for 2026, while the forecasts for 2027 and the long term, at 2.0%, remain unchanged.
Fed officials have lowered their unemployment rate forecast from 4.4% to 4.2% for this year and from 4.4% to 4.3% for next year. The 2026 forecast stays at 4.3%, the long-term forecast remains at 4.2%, while the 2027 forecast has increased from 4.2% to 4.3%.
Fed officials provide forecasts regarding unemployment, inflation, economic growth, and interest rates in the U.S. on a quarterly basis for the next three years and the long term.