Officials lowered their jobless-rate estimates after unemployment fell to 3.8 percent as of May, matching April 2000 as the lowest reading since 1969. U.S. payrolls expanded by more than 1 million workers in the first five months of 2018, reaching the milestone faster than in the previous two years.
Fed policy makers now see U.S. unemployment at 3.6 percent in the fourth quarter, followed by 3.5 percent in 2019 and 2020, based on median projections. That compares with March’s forecasts for 3.8 percent this year and 3.6 percent in the following two years. Estimates of the long-run sustainable unemployment rate were unchanged at 4.5 percent.
Inflation Forecasts
On inflation, policy makers forecast a slight overshoot of their target starting in 2018 at 2.1 percent, and running through 2019 and 2020, compared with a 2020 overshoot in March’s projections. The Fed’s preferred price gauge -- the Commerce Department’s personal consumption expenditures index -- rose 2 percent from a year earlier in March and April, after spending most of the past six years below it.
The core PCE index, which excludes food and energy and is seen by officials as a better gauge of underlying price pressures, is forecast to reach 2 percent this year and 2.1 percent in 2019 and 2020. The index rose 1.8 percent in April from a year earlier.
U.S. central bankers again emphasized on Wednesday that the goal is “symmetric,” and they said in minutes of the May meeting that “a temporary period of inflation modestly above 2 percent” would help anchor long-run inflation expectations around the target.
The median estimate for economic growth this year rose to 2.8 percent from 2.7 percent in March, with projections unchanged for 2.4 percent in 2019 and 2 percent in 2020. The committee’s forecast for the long-run sustainable growth rate of the economy held at 1.8 percent, suggesting policy makers are skeptical of the effect of tax cuts on the economy’s capacity for growth.
This article was provided by Bloomberg News.