FOMC Minutes
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Minutes of the Federal Open Market Committee
June 18–19, 2019
A joint meeting of the Federal Open Market Committee
and the Board of Governors was held in the offices of
the Board of Governors of the Federal Reserve System
in Washington, D.C., on Tuesday, June 18, 2019, at
10:30 a.m. and continued on Wednesday, June 19, 2019,
at 9:00 a.m. 1
PRESENT:
Jerome H. Powell, Chair
John C. Williams, Vice Chair
Michelle W. Bowman
Lael Brainard
James Bullard
Richard H. Clarida
Charles L. Evans
Esther L. George
Randal K. Quarles
Eric Rosengren
Patrick Harker, Robert S. Kaplan, Neel Kashkari,
Loretta J. Mester, and Michael Strine, Alternate
Members of the Federal Open Market Committee
Thomas I. Barkin, Raphael W. Bostic, and Mary C.
Daly, Presidents of the Federal Reserve Banks of
Richmond, Atlanta, and San Francisco, respectively
James A. Clouse, Secretary
Matthew M. Luecke, Deputy Secretary
David W. Skidmore, Assistant Secretary
Michelle A. Smith, Assistant Secretary
Mark E. Van Der Weide, General Counsel
Michael Held, Deputy General Counsel
Steven B. Kamin, Economist
Thomas Laubach, Economist
Stacey Tevlin, Economist
Rochelle M. Edge, Eric M. Engen, Anna Paulson,
Christopher J. Waller, William Wascher, and Beth
Anne Wilson, 2 Associate Economists
The Federal Open Market Committee is referenced as the
“FOMC” and the “Committee” in these minutes.
2 Attended Tuesday session only.
1
Lorie K. Logan, Manager pro tem, 3 System Open
Market Account
Ann E. Misback, Secretary, Office of the Secretary,
Board of Governors
Matthew J. Eichner, 4 Director, Division of Reserve
Bank Operations and Payment Systems, Board of
Governors; Andreas Lehnert, Director, Division of
Financial Stability, Board of Governors
Jennifer J. Burns, Deputy Director, Division of
Supervision and Regulation, Board of Governors;
Michael T. Kiley, Deputy Director, Division of
Financial Stability, Board of Governors; Trevor A.
Reeve, Deputy Director, Division of Monetary
Affairs, Board of Governors
Jon Faust, Senior Special Adviser to the Chair, Office
of Board Members, Board of Governors
Joshua Gallin, Special Adviser to the Chair, Office of
Board Members, Board of Governors
Brian M. Doyle, Wendy E. Dunn,2 Joseph W. Gruber,
Ellen E. Meade, and John M. Roberts, Special
Advisers to the Board, Office of Board Members,
Board of Governors
Linda Robertson, Assistant to the Board, Office of
Board Members, Board of Governors
Shaghil Ahmed, Senior Associate Director, Division of
International Finance, Board of Governors
Jane E. Ihrig and Don H. Kim, Senior Advisers,
Division of Monetary Affairs, Board of Governors;
Jeremy B. Rudd, Senior Adviser, Division of
Research and Statistics, Board of Governors
3 In the absence of the manager, the Committee’s Rules of
Organization provide that the deputy manager acts as manager
pro tem.
4 Attended through the discussion of developments in financial markets and open market operations.
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Marnie Gillis DeBoer and Min Wei, Associate
Directors, Division of Monetary Affairs, Board of
Governors
Christopher J. Gust,4 Deputy Associate Director,
Division of Monetary Affairs, Board of Governors;
Matteo Iacoviello and Paul R. Wood,2 Deputy
Associate Directors, Division of International
Finance, Board of Governors; Jeffrey D. Walker,4
Deputy Associate Director, Division of Reserve
Bank Operations and Payment Systems, Board of
Governors
Andre Anderson, First Vice President, Federal Reserve
Bank of Atlanta
David Altig and Kartik B. Athreya, Executive Vice
Presidents, Federal Reserve Banks of Atlanta and
Richmond, respectively
Edward S. Knotek II, Paolo A. Pesenti, Mark L.J.
Wright, and Nathaniel Wuerffel,4 Senior Vice
Presidents, Federal Reserve Banks of Cleveland,
New York, Minneapolis, and New York,
respectively
Burcu Duygan-Bump, Andrew Figura, Glenn Follette,
Patrick E. McCabe, and Paul A. Smith, Assistant
Directors, Division of Research and Statistics,
Board of Governors; Laura Lipscomb,4 Zeynep
Senyuz,4 and Rebecca Zarutskie, Assistant
Directors, Division of Monetary Affairs, Board of
Governors; Steve Spurry,4 Assistant Director,
Division of Supervision and Regulation, Board of
Governors
Roc Armenter, Patrick Dwyer,4 George A. Kahn,
Giovanni Olivei, Rania Perry,4 Benedict Wensley,4
and Patricia Zobel, Vice Presidents, Federal
Reserve Banks of Philadelphia, New York, Kansas
City, Boston, New York, New York, and New
York, respectively
Matthew Malloy,4 Section Chief, Division of Monetary
Affairs, Board of Governors
Nicolas Petrosky-Nadeau, Senior Research Advisor,
Federal Reserve Bank of San Francisco
Penelope A. Beattie,2 Assistant to the Secretary, Office
of the Secretary, Board of Governors
Jim Dolmas, Senior Research Economist, Federal
Reserve Bank of Dallas
Mark A. Carlson,4 Senior Economic Project Manager,
Division of Monetary Affairs, Board of Governors
Standing Repurchase Facility
The staff briefed the Committee on the possible role of
a standing fixed-rate repurchase agreement (repo) facility
as part of the monetary policy implementation framework; a facility of this type would allow counterparties
to obtain temporary liquidity at a fixed rate of interest
through repurchase transactions with the Federal Reserve involving their holdings of select securities eligible
for open market operations. The staff presentation
noted how such a facility could provide a backstop
against unusual spikes in the federal funds rate and other
money market rates and might also provide incentives
for banks to shift the composition of their portfolios of
liquid assets away from reserves and toward high-quality
securities. Key design features for such a facility, including the fixed rate offered to counterparties, the set of
eligible counterparties, and the range of securities eligible to be placed at the facility, would influence the effectiveness of a facility in achieving either of these objectives. The staff noted a number of considerations that
could arise in setting these design parameters, including
potential repercussions in unsecured and secured fund-
Sean Savage, Senior Project Manager, Division of
Monetary Affairs, Board of Governors
David H. Small, Project Manager, Division of
Monetary Affairs, Board of Governors
Heather A. Wiggins,4 Group Manager, Division of
Monetary Affairs, Board of Governors
Maria Otoo, Principal Economist, Division of Research
and Statistics, Board of Governors; Lubomir
Petrasek, Marcelo Rezende, and Francisco
Vazquez-Grande, Principal Economists, Division
of Monetary Affairs, Board of Governors; Patrice
Robitaille,2 Principal Economist, Division of
International Finance, Board of Governors
Donielle A. Winford, Information Management
Analyst, Division of Monetary Affairs, Board of
Governors
Gara Afonso4 and Scott Sherman,4 Assistant Vice
Presidents, Federal Reserve Bank of New York
Minutes of the Meeting of June 18–19, 2019
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ing markets, the eligibility of counterparties in weak financial condition, the potential that turning to such a facility could become stigmatized, and issues of a level
playing field across different classes of counterparties.
Participants commented on a number of issues in connection with key design parameters for a repo facility. In
terms of the setting of the facility’s fixed rate, many participants acknowledged a tradeoff in determining the
level of the rate relative to other money market rates.
On the one hand, establishing the rate at a narrow spread
above money market rates would likely provide better
interest rate control and could also be helpful in avoiding
stigma that can be associated with the use of standing
lending facilities with fixed rates set well above the level
of money market rates. On the other hand, setting the
rate close to the level of money market rates could result
in very sizable Federal Reserve operations on a daily basis that could be viewed as disintermediating the activity
of private entities in money markets.
In considering the eligible set of counterparties for a
repo facility, a number of participants noted that making
the facility available only to primary dealers would likely
imply that the effects of the facility would be most direct
on repo markets, while the influence on the federal
funds market would be only indirect. A couple of participants noted that, particularly if banks were eligible
counterparties, it would be important for counterparties
of all sizes to have access to funding through the facility
on the same terms. A few participants noted that a facility could enhance financial stability by providing a
means by which nonbank counterparties can readily obtain liquidity against their high-quality assets. A couple
of other participants noted ways that a repo facility could
have unintended effects on financial stability; for example, if reserves help support overall financial stability, a
facility that significantly reduced the demand for reserves might not be beneficial.
Many participants commented on issues associated with
the availability of such a facility to firms in different
states of financial condition. Several thought there
should not be a guarantee of access to such a facility regardless of a firm’s financial condition, while a number
of others were willing to consider how such a facility
could be structured to work effectively in a stressed environment where high-quality liquid assets were used as
collateral. A few participants noted that the availability
of the facility to banks during periods of stress, particularly when they might be in weak financial condition,
could be an important factor determining whether a facility would significantly reduce banks’ demand for reserves in normal times.
In their discussion of key objectives for establishing a
repo facility, some participants raised questions about
whether such a facility is needed in an ample-reserves
framework, noting that the current ample-reserves regime has provided good interest rate control. Other participants commented on the potential benefits of such a
facility as a way to enhance interest rate control in the
current implementation regime or as a means to operate
in the current implementation framework but with a significantly smaller quantity of reserves than at present. A
couple of participants noted that a facility could damp
volatility in repo rates. Several participants noted that a
facility could possibly aid with multiple policy objectives.
A number of participants noted that the policy objectives for a fixed-rate standing repo facility would have
implications for the appropriate design for the facility.
Several participants recognized the need to carefully
evaluate possible parameter settings to guard against unintended consequences, including the potential for
moral hazard or a more volatile Federal Reserve balance
sheet. In addition, several participants highlighted the
importance of evaluating whether other tools or initiatives could better achieve the desired goals. Overall, no
decisions were reached at this meeting; participants
stated that additional work would be necessary to clearly
define the objectives of such a facility and to evaluate its
potential net benefits.
Developments in Financial Markets and Open Market Operations
The manager pro tem discussed developments in global
financial markets over the intermeeting period. Traderelated developments reportedly led many market participants to take a more pessimistic view of the U.S. economic outlook. Equity prices and interest rates fell noticeably after the announcement of higher tariffs on Chinese imports in early May and then again after news that
tariffs might be imposed on Mexican imports. In response to these developments, markets appeared to become more sensitive to incoming news about the outlook for global growth and inflation, including data that
pointed to a continued subdued inflation environment
and to slower economic growth in the United States and
abroad.
Treasury yields fell sharply and far-forward measures of
inflation compensation dropped significantly in the
United States and abroad. Against this backdrop, market participants reportedly viewed communications by
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Federal Reserve officials as signaling a greater likelihood
of a cut in the target range for the federal funds rate later
in the year. The expected path of the federal funds rate
embedded in futures prices shifted down significantly
over the period.
In the euro area, far-forward measures of inflation compensation fell noticeably, and market participants reportedly increasingly came to believe that further monetary
policy accommodation would be needed. Late in the intermeeting period, remarks by European Central Bank
(ECB) President Draghi were interpreted as suggesting
increased odds of further asset purchases by the ECB.
Euro-area peripheral spreads to German equivalents
moved sharply lower, and far-forward inflation compensation recovered modestly.
The manager pro tem turned next to a review of money
market developments and Open Market Desk operations. Money market rates generally stabilized at modestly lower levels over the intermeeting period, likely reflecting both the technical adjustment in the interest on
excess reserves (IOER) rate following the May FOMC
meeting and a sizable increase in reserve balances associated with a decline in balances held by the Treasury in
its account at the Federal Reserve. Market participants
reported seeing slightly more pass-through from repo
rates to the federal funds rate on days with heightened
firmness in repo rates. Market participants attributed recent increases in repo rates on month-end and midmonth Treasury auction settlement dates in part to elevated net dealer inventories of Treasury securities, which
dealers finance in the repo market.
Regarding open market operations over the period,
given the substantial decline in mortgage rates over recent months and an associated increase in refinancing
activity, principal payments on the Federal Reserve’s
holdings of agency mortgage-backed securities (MBS)
had recently moved somewhat above the $20 billion
monthly redemption cap. As a result, the Desk began in
May to reinvest agency MBS principal payments in excess of the cap. Based on current market rates and prepayment forecasts, the Desk expected to reinvest modest amounts of agency MBS over the coming months
and possibly again in 2020, particularly during the summer months.
By unanimous vote, the Committee ratified the Desk’s
domestic transactions over the intermeeting period.
There were no intervention operations in foreign currencies for the System’s account during the intermeeting period.
Staff Review of the Economic Situation
The information available for the June 18–19 meeting
indicated that labor market conditions remained strong.
Real gross domestic product (GDP) appeared to be rising at a moderate rate in the second quarter, as household spending growth picked up from the weak first
quarter while business fixed investment was soft. Consumer price inflation, as measured by the 12-month percentage change in the price index for personal consumption expenditures (PCE), was below 2 percent in April.
Survey-based measures of longer-run inflation expectations were little changed.
Total nonfarm payroll employment expanded solidly, on
average, in April and May; however, job gains slowed
sharply in May after a strong increase in April. The unemployment rate declined to 3.6 percent in April and remained there in May, its lowest level in 50 years. The
labor force participation rate moved down somewhat in
April and held steady in May, remaining close to its average over the previous few years; the employment-topopulation ratio stayed flat in April and May. The unemployment rates for African Americans, Asians, and
Hispanics decreased, on net, over April and May and
were below their levels at the end of the previous economic expansion, though persistent differentials in unemployment rates across groups remained. The average
share of workers employed part time for economic reasons over April and May continued to be below the lows
reached in late 2007. The rate of private-sector job
openings moved up in March and held steady in April,
while the rate of quits was unchanged at a high level; the
four-week moving average of initial claims for unemployment insurance benefits through early June was near
historically low levels. Average hourly earnings for all
employees rose 3.1 percent over the 12 months ending
in May, slightly lower than in April but somewhat faster
than a year earlier. Total labor compensation per hour
in the business sector increased 1.6 percent over the four
quarters ending in the first quarter, slower than a year
earlier.
Total consumer prices, as measured by the PCE price
index, increased 1.5 percent over the 12 months ending
in April. This increase was slower than a year earlier, as
core PCE price inflation (which excludes changes in
consumer food and energy prices) moved down to
1.6 percent, consumer food price inflation remained well
below core inflation, and consumer energy price inflation slowed considerably to about the same rate as core
inflation. The trimmed mean measure of PCE price inflation constructed by the Federal Reserve Bank of Dal-
Minutes of the Meeting of June 18–19, 2019
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las was 2.0 percent over that 12-month period. The consumer price index (CPI) rose 1.8 percent over the
12 months ending in May, while core CPI inflation was
2.0 percent. The monthly change in core PCE prices in
April and the staff’s estimate of the change in May—
based on the CPI data and the relevant prices from the
producer price index—were higher in both of these
months than the very low readings seen in January
through March. Recent survey-based measures of
longer-run inflation expectations were little changed on
balance. While measures from the Desk’s Survey of Primary Dealers and Survey of Market Participants were little changed, the preliminary June reading from the University of Michigan Surveys of Consumers dropped significantly to below its range in recent years.
Growth in real consumer expenditures appeared to pick
up to a solid rate in the second quarter from its weak
first-quarter pace. The components of the nominal retail
sales data used by the Bureau of Economic Analysis to
estimate PCE increased in May, and the retail sales data
for the previous two months were revised up notably.
Sales of light motor vehicles rose sharply in May after
stepping down in April. Key factors that influence consumer spending—including a low unemployment rate,
further gains in real disposable income, and still elevated
measures of households’ net worth—were supportive of
solid real PCE growth in the near term. In addition, the
Michigan survey measure of consumer sentiment edged
down in the preliminary June reading but was still at an
upbeat level.
Real residential investment in the second quarter looked
to be continuing the decline seen earlier in the year, albeit at a slower rate. Starts of new single-family homes
rose in April but fell back in May, while starts of multifamily units increased over both months. Building permit issuance for new single-family homes—which tends
to be a good indicator of the underlying trend in construction of such homes—was at roughly the same level
in May as its first-quarter average. Sales of new homes
fell notably in April after a marked gain in March, and
existing home sales edged down in April.
Real nonresidential private fixed investment appeared
soft in the second quarter. Real private expenditures for
business equipment and intellectual property looked to
be roughly flat, as nominal shipments of nondefense
capital goods excluding aircraft moved sideways in April.
Forward-looking indicators of business equipment
spending pointed to possible decreases in the near term.
Orders for nondefense capital goods excluding aircraft
declined notably in April and continued to be below the
level of shipments, readings on business sentiment deteriorated further, and analysts’ expectations of firms’
longer-term profit growth moved down sharply. Nominal business expenditures for nonresidential structures
outside of the drilling and mining sector decreased in
April, and the number of crude oil and natural gas rigs
in operation—an indicator of business spending for
structures in the drilling and mining sector—continued
to decline through mid-June.
Industrial production moved down in April and picked
up in May, leaving output about flat over those two
months, but production was lower than at the beginning
of the year. Manufacturing output declined, on net, over
April and May, although mining output expanded. Automakers’ assembly schedules suggested that the production of light motor vehicles would move up in the
near term, but new orders indexes from national and regional manufacturing surveys pointed to continued soft
total factory output in the coming months. Moreover,
industry news indicated that aircraft production would
continue to be slow in the near term.
Total real government purchases appeared to be rising
solidly in the second quarter. Federal government purchases were being boosted by strong increases in defense
spending through May and the return of nondefense
purchases to more typical levels after the partial federal
government shutdown in the first quarter. Real purchases by state and local governments seemed to be rising modestly; total payrolls of these governments edged
down over April and May, but nominal state and local
construction spending expanded notably in April.
Net exports added substantially to real GDP growth in
the first quarter, as exports increased robustly and imports fell. After widening in March, the nominal trade
deficit narrowed in April; even though exports declined,
imports declined by more. The available data suggested
that net exports would be a small drag on real GDP
growth in the second quarter.
Growth in the foreign economies remained subdued in
the first quarter, as soft growth in the Canadian economy
and weakness in several emerging market economies
(EMEs) offset somewhat stronger growth in other advanced foreign economies (AFEs) and in China’s economy. Recent indicators suggested that the pace of economic activity picked up in Canada in the second quarter
but slowed in some other AFEs. Economic growth also
appeared to have slowed in China. Foreign inflation remained subdued but rose a bit from lows earlier in the
year, in part reflecting higher retail energy prices in many
economies.
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Staff Review of the Financial Situation
Investors’ concerns about downside risks to the economic outlook weighed on financial markets over the intermeeting period. Market participants cited negative
news about international trade tensions and, to a lesser
extent, soft U.S. and foreign economic data as factors
that contributed to these developments. Nominal
Treasury yields posted notable declines and the expected
path of policy shifted down considerably over the period. Equity prices declined, on net, and corporate bond
spreads widened. However, financing conditions for
businesses and households generally remained supportive of economic growth.
FOMC communications following the May meeting had
little net effect on yields, though they rose modestly following the Chair’s press conference. Later in the period,
the expected path of policy moved down, partly in response to incoming information pointing to a weaker
economic outlook. The market-implied probability for
a 25 basis point cut in the target range for the federal
funds rate by the July FOMC meeting rose to about
85 percent. The market-implied path for the federal
funds rate for 2019 and 2020 shifted down markedly.
Based on overnight index swap rates, investors expected
the federal funds rate to decline about 60 basis points by
the end of this year—a downward revision of 40 basis
points over the intermeeting period.
Longer-term Treasury yields fell considerably over the
period, with the declines driven primarily by negative
headlines about trade tensions between the United States
and two major trading partners, China and Mexico.
Softer-than-expected domestic economic news, such as
the weaker-than-expected employment data, also contributed to the declines. The spread between 10-year
and 3-month Treasury yields fell to the bottom decile of
its distribution since 1971. Measures of inflation compensation derived from Treasury Inflation-Protected Securities also decreased notably over the period along
with declines in oil prices.
Major U.S. equity price indexes declined, on net, over
the intermeeting period. Equity prices fell notably over
the first few weeks of the period, primarily in response
to the escalation of trade tensions with China and Mexico. Firms with high China exposure and those in cyclical sectors—such as energy, information technology, industrials, communication services, and banks—posted
particularly large losses. However, later in the period,
stock prices regained a significant portion of their losses
amid an easing of trade tensions with Mexico and expectations of a more accommodative stance of policy. One-
month option-implied volatility on the S&P 500 index—
the VIX—increased over the period, and corporate
credit spreads widened.
Conditions in short-term funding markets remained stable over the intermeeting period. Overnight interest
rates in short-term funding markets declined in response
to the technical adjustment that reduced the IOER rate
5 basis points to 2.35 percent after the May FOMC
meeting. The average of the effective federal funds rate
over the period was about 6 basis points below the level
just before the May FOMC meeting, well within the
FOMC’s target range. Rates on commercial paper and
negotiable certificates of deposit also declined somewhat.
Escalation of trade tensions and soft economic data also
weighed on foreign financial markets. Most major global
equity price indexes declined, on net, and EME sovereign spreads widened modestly. In the AFEs, policy expectations and sovereign yields declined notably, in part
reflecting more-accommodative monetary policy communications by major central banks.
The broad dollar index rose a bit over the intermeeting
period. The Japanese yen and Swiss franc, which are
viewed as safe-haven currencies, appreciated against the
dollar. The British pound depreciated amid increased
uncertainty around Brexit. Increased trade tensions contributed to some depreciation of the Chinese renminbi.
The value of the Mexican peso against the dollar fluctuated in response to announcements related to potential
tariffs on imports from Mexico but ended the period
only slightly lower.
Financing conditions for nonfinancial businesses continued to be accommodative overall. Gross issuance of
corporate bonds was strong in May following a spell of
seasonal weakness in April. The credit quality of nonfinancial corporations remained solid, as the volume of
nonfinancial corporate bond upgrades outpaced that of
downgrades in May. Issuance in the institutional syndicated leveraged loan market was subdued in April but
rebounded in May, reflecting strong issuance beyond
that associated with refinancing of maturing leveraged
loans. Meanwhile, commercial and industrial lending
slowed somewhat in April and May after a period of
stronger growth in the first quarter. Small business
credit market conditions were little changed, and credit
conditions in municipal bond markets stayed accommodative on net.
In the commercial real estate (CRE) sector, financing
conditions continued to be generally accommodative.
Minutes of the Meeting of June 18–19, 2019
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Commercial mortgage-backed securities (CMBS)
spreads widened slightly over the intermeeting period
but remained near the low end of their post-crisis range.
Issuance of agency and non-agency CMBS was solid in
May, and CRE lending by banks expanded in April and
May at a slower rate than in the first quarter.
Financing conditions in the residential mortgage market
also remained supportive over the intermeeting period.
Home mortgage rates decreased about 40 basis points.
Since last November, mortgage rates had declined more
than 1 percentage point, contributing to an increase in
home-purchase mortgage originations to the solid levels
seen in 2017.
Financing conditions in consumer credit markets were
little changed in recent months and remained generally
supportive of household spending, although the supply
of credit to consumers with subprime credit scores continued to be tight. Consumer credit expanded at a moderate pace in the first quarter, with bank credit data
pointing to a pickup in April and May. Conditions in the
consumer asset-backed securities market remained stable over the intermeeting period, with robust issuance
and spreads that were little changed at low levels.
Staff Economic Outlook
The projection for U.S. economic activity prepared by
the staff for the June FOMC meeting was revised down
somewhat on balance. Real GDP growth was forecast
to slow to a moderate rate in the second quarter and
move down to a more modest pace in the second half of
the year, primarily reflecting a more downbeat near-term
outlook for business fixed investment. The projection
for real GDP growth over the medium term was little
changed, as the effects of a higher projected path for the
broad real dollar and lower trajectory for foreign economic growth were largely counterbalanced by a lower
projected path for interest rates. Real GDP was forecast
to expand at a rate a little above the staff’s estimate of
potential output growth in 2019 and 2020 and then slow
to a pace slightly below potential output growth in 2021.
The unemployment rate was projected to be roughly flat
through 2021 and remain below the staff’s estimate of
its longer-run natural rate. With labor market conditions
judged to be tight, the staff continued to assume that
In conjunction with this FOMC meeting, members of the
Board of Governors and Federal Reserve Bank presidents
submitted their projections of the most likely outcomes for
real GDP growth, the unemployment rate, and inflation for
each year from 2019 through 2021 and over the longer run,
based on their individual assessments of the appropriate path
5
projected employment gains would manifest in smallerthan-usual downward pressure on the unemployment
rate and in larger-than-usual upward pressure on the labor force participation rate.
The staff’s forecast for inflation was little changed on
balance. The forecast for total PCE price inflation this
year was revised down somewhat, reflecting a lower
near-term projection for energy prices. The core inflation forecast for this year was unchanged at a level below
2 percent. Both total and core inflation were projected
to move up slightly next year, as the low readings early
this year were expected to be transitory, but nevertheless
to continue to run below 2 percent.
The staff viewed the uncertainty around its projections
for real GDP growth, the unemployment rate, and inflation as generally similar to the average of the past
20 years, although uncertainty was seen to have increased since the previous forecast. Moreover, the staff
also judged that the risks to the forecast for real GDP
growth had tilted to the downside, with a skew to the
upside for the unemployment rate. The increased uncertainty and shift to downside risks around the projection reflected the staff’s assessment that international
trade tensions and foreign economic developments
seemed more likely to move in directions that could have
significant negative effects on the U.S. economy than to
resolve more favorably than assumed. With the risks to
the forecast for economic activity tilted to the downside,
the risks to the inflation projection were also viewed as
having a downward skew.
Participants’ Views on Current Conditions and the
Economic Outlook
Participants judged that uncertainties and downside risks
surrounding the economic outlook had increased significantly over recent weeks. While they continued to view
a sustained expansion of economic activity, strong labor
market conditions, and inflation near the Committee’s
symmetric 2 percent objective as the most likely outcomes, many participants attached significant odds to
scenarios with less favorable outcomes. 5 Moreover,
nearly all participants in their submissions to the Summary of Economic Projections (SEP), had revised down
their assessment of the appropriate path of the federal
for the federal funds rate. The longer-run projections represented each participant’s assessment of the rate to which each
variable would be expected to converge, over time, under appropriate monetary policy and in the absence of further
shocks to the economy. These projections and policy assessments are described in the Summary of Economic Projections, which is an addendum to these minutes.
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funds rate over the projection period that would be consistent with their modal economic outlook. Many participants noted that, since the Committee’s previous
meeting, the economy appeared to have lost some momentum and pointed to a number of factors supporting
that view including recent weak indicators for business
confidence, business spending and manufacturing activity; trade developments; and signs of slowing global economic growth. Many participants noted that they
viewed the risks to their growth and inflation projections, such as those emanating from greater uncertainty
about trade, as shifting notably over recent weeks and
that risks were now weighted to the downside.
Participants discussed at some length the softness in various indicators of business fixed investment in the second quarter. Incoming data on shipments and orders of
new capital goods looked weak and recent readings from
some manufacturing surveys had dropped sharply. Private sector analysts had marked down their forecasts for
longer-term corporate profit growth. Manufacturing
production had posted declines so far this year. In addition, contacts reported that softer export sales, weaker
economic activity abroad, and elevated levels of uncertainty regarding the global outlook were weighing on
business sentiment and leading firms to reassess plans
for investment spending. Several participants noted
comments from business contacts reporting that their
base case now assumed that uncertainties about the
global outlook would remain prominent over the medium term and would continue to act as a drag on investment. Several participants also noted reports from
some business contacts in the manufacturing sector suggesting that they were putting capital expenditures or hiring plans on hold and were reevaluating their global supply chains in light of trade uncertainties. A couple of
participants, however, pointed to signs that investment
might pick up, including reports from some contacts
that their orders and shipments remained strong and that
some contacts planned to hire more workers. A few participants also noted ongoing challenges in the agricultural sector, including those associated with increased
trade uncertainty, weak export markets, wet weather, and
severe flooding. A few participants remarked on the decline in energy prices and the associated reduction in activity in the energy sector.
In their discussion of the household sector, participants
noted that available data on consumer spending had
been solid, supported by a strong labor market and rising
incomes. Several participants also noted that measures
of consumer sentiment remained upbeat, and a couple
noted that their business contacts confirmed the view
that consumer spending had rebounded from the weak
patch earlier in the year. Several participants, however,
noted that tariffs could eventually become a drag on
consumer durables spending, especially if additional tariffs on consumer goods were imposed, and that they
would be monitoring incoming data for signs of this effect. A couple of participants noted that the continued
softness in the housing sector was a concern, even
though the decline in mortgage rates since last fall was
expected to provide stronger impetus for activity; a couple of participants were somewhat optimistic that residential investment would pick up.
In their discussion of the labor market, participants cited
evidence that conditions remained strong, including the
very low unemployment rate and the fact that job gains
had been solid, on average, in recent months. That said,
job gains in May were weaker than expected and, in light
of other developments, participants judged that it would
be important to closely monitor incoming data for any
signs of softening in labor market conditions. Reports
from business contacts pointed to continued strong labor demand, with many firms planning to hire more
workers. Economy-wide wage growth was seen as being
broadly consistent with modest average rates of labor
productivity growth in recent years. However, a few participants noted that there were limited signs of upward
pressure on wage inflation. A few participants cited the
combination of muted inflation pressures, moderate
wage growth, and expanding employment as a possible
indication that some slack remained in the labor market.
Partly reflecting that combination of developments, several participants had revised down their SEP estimates
of the longer-run normal rate of unemployment.
Participants noted that readings on overall inflation and
inflation for items other than food and energy had come
in lower than expected over recent months. In light of
recent softer inflation readings, perceptions of downside
risks to growth, and global disinflationary pressures,
many participants viewed the risks to the outlook for inflation as weighted to the downside. Several participants
indicated that, while headline inflation had been close to
2 percent last year, it was noteworthy that inflation had
softened this year despite continued strong labor market
conditions. Participants generally noted that they revised down their SEP projections of inflation for the
current year in light of recent data. They still anticipated
that the overall rate of inflation would firm somewhat
and move up to the Committee’s longer-run symmetric
objective of 2 percent over the next few years. Consistent with that view, several participants commented
that alternative measures of inflation that removed the
Minutes of the Meeting of June 18–19, 2019
Page 9
_____________________________________________________________________________________________
influence of unusually large changes in the prices of individual items in either direction were running around
2 percent. However, a number of participants anticipated that the return to 2 percent would take longer than
previously projected even with an assumed path for the
federal funds rate that was lower than in their previous
projections.
In their discussion of indicators of inflation expectations, participants generally observed that market-based
measures of inflation compensation had declined and
were at low levels. Some participants also noted that recent readings on some survey measures of consumers’
inflation expectations had declined or stood at historically low levels. Many participants further noted that
longer-term inflation expectations could be somewhat
below levels consistent with the Committee’s 2 percent
inflation objective, or that the continued weakness in inflation could prompt expectations to slip further. These
developments might make it more difficult to achieve
their inflation objective on a sustained basis. However,
several participants remarked that inflation expectations
appeared to be at levels consistent with the Committee’s
2 percent inflation objective.
Participants generally agreed that downside risks to the
outlook for economic activity had risen materially since
their May meeting, particularly those associated with ongoing trade negotiations and slowing economic growth
abroad. Other downside risks cited by several participants included the possibility that federal budget negotiations could result in a sharp reduction in government
spending or that negotiations to raise the federal debt
limit could be prolonged. A couple of participants observed that an economic deterioration in the United
States, if it occurred, might be amplified by significant
debt burdens for many firms. A few participants remarked that an upside risk to the outlook for economic
activity and inflation included a scenario in which trade
negotiations were resolved favorably and business sentiment rebounded sharply.
In their discussion of financial developments, participants observed that the increase in uncertainty surrounding the global outlook had affected risk sentiment
in financial markets. While overall financial conditions
remained supportive of growth, those conditions appeared to be premised importantly on expectations that
the Federal Reserve would ease policy in the near term
to help offset the drag on economic growth stemming
from uncertainties about the global outlook and other
downside risks. Participants also discussed the decline
in yields on longer-term Treasury securities in recent
months. Many participants noted that the spread between the 10-year and 3-month Treasury yields was now
negative, and several noted that their assessment of the
risk of a slowing in the economic expansion had increased based on either the shape of the yield curve or
other financial and economic indicators. A few participants pointed to the growth in debt issuance by nonfinancial corporations and still generally high asset valuations as developments that warranted continued monitoring.
In their discussion of monetary policy decisions at this
meeting, participants noted that, under their baseline
outlook, the labor market was likely to remain strong
with economic activity growing at a moderate pace.
However, they judged that the risks and uncertainties
surrounding their outlooks, particularly those related to
the global economic outlook, had intensified in recent
weeks. Moreover, inflation continued to run below the
Committee’s 2 percent objective; similarly, inflation for
items other than food and energy had remained below
2 percent as well. In addition, some readings on inflation expectations had been low. The increase in risks
and uncertainties surrounding the outlook was quite recent and nearly all participants agreed that it would be
appropriate to maintain the current target range for the
federal funds rate at 2¼ to 2½ percent at this meeting.
However, they noted that it would be important to monitor the implications of incoming information and global
economic developments for the U.S. economic outlook.
A couple of participants favored a cut in the target range
at this meeting, judging that a prolonged period with inflation running below 2 percent warranted a more accommodative policy response to firmly center inflation
and inflation expectations around the Committee’s symmetric 2 percent objective.
With regard to the outlook for monetary policy beyond
this meeting, nearly all participants had revised down
their assessment of the appropriate path for the federal
funds rate over the projection period in their SEP submissions, and some had marked down their estimates of
the longer-run normal level of the funds rate as well.
Many participants indicated that the case for somewhat
more accommodative policy had strengthened. Participants widely noted that the global developments that led
to the heightened uncertainties about the economic outlook were quite recent. Many judged additional monetary policy accommodation would be warranted in the
near term should these recent developments prove to be
sustained and continue to weigh on the economic outlook. Several others noted that additional monetary pol-
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Federal Open Market Committee
_____________________________________________________________________________________________
icy accommodation could well be appropriate if incoming information showed further deterioration in the outlook. Participants stated a variety of reasons that would
call for a lower path of the federal funds rate. Several
participants noted that a near-term cut in the target range
for the federal funds rate could help cushion the effects
of possible future adverse shocks to the economy and,
hence, was appropriate policy from a risk-management
perspective. Some participants also noted that the continued shortfall in inflation risked a softening of inflation
expectations that could slow the sustained return of inflation to the Committee’s 2 percent objective. Several
participants pointed out that they had revised down their
estimates of the longer-run normal rate of unemployment and, as a result, saw a smaller upward contribution
to inflation pressures from tight resource utilization than
they had earlier. A few participants were concerned that
inflation expectations had already moved below levels
consistent with the Committee’s symmetric 2 percent
objective and that it was important to provide additional
accommodation in the near term to bolster inflation expectations. A few participants judged that allowing inflation to run above 2 percent for some time could help
strengthen the credibility of the Committee’s commitment to its symmetric 2 percent inflation objective.
Some participants suggested that although they now
judged that the appropriate path of the federal funds rate
would follow a flatter trajectory than they had previously
assumed, there was not yet a strong case for a rate cut
from current levels. They preferred to gather more information on the trajectory of the economy before concluding that a change in policy stance is warranted. A
few participants expressed the view that with the economy still in a favorable position in terms of the dual
mandate, an easing of policy in an attempt to increase
inflation a few tenths of a percentage point risked overheating the labor markets and fueling financial imbalances. Several participants observed that the trimmed
mean measure of PCE price inflation constructed by the
Federal Reserve Bank of Dallas had stayed near 2 percent recently, underscoring the view that the recent low
readings on inflation will prove transitory.
Committee Policy Action
In their discussion of monetary policy for the period
ahead, members noted the significant increase in risks
and uncertainties attending the economic outlook.
There were signs of weakness in U.S. business spending,
and foreign economic data were generally disappointing,
raising concerns about the strength of global economic
growth. While strong labor markets and rising incomes
continued to support the outlook for consumer spending, uncertainties and risks regarding the global outlook
appeared to be contributing to a deterioration in risk
sentiment in financial markets and a decline in business
confidence that pointed to a weaker outlook for business
investment in the United States. Inflation pressures remained muted and some readings on inflation expectations were at low levels. Although nearly all members
agreed to maintain the target range for the federal funds
rate at 2¼ to 2½ percent at this meeting, they generally
agreed that risks and uncertainties surrounding the economic outlook had intensified and many judged that additional policy accommodation would be warranted if
they continued to weigh on the economic outlook. One
member preferred to lower the target range for the federal funds rate by 25 basis points at this meeting, stating
that the Committee should ease policy at this meeting to
re-center inflation and inflation expectations at the
Committee’s symmetric 2 percent objective.
Members agreed that in determining the timing and size
of future adjustments to the target range for the federal
funds rate, the Committee would assess realized and expected economic conditions relative to the Committee’s
maximum-employment and symmetric 2 percent inflation objectives. They reiterated that this assessment
would take into account a wide range of information, including measures of labor market conditions, indicators
of inflation pressures and inflation expectations, and
readings on financial and international developments.
More generally, members noted that decisions regarding
near-term adjustments of the stance of monetary policy
would appropriately remain dependent on the implications of incoming information for the economic outlook.
With regard to the postmeeting statement, members
agreed to several adjustments in the description of the
economic situation, including a revision in the description of market-based measures of inflation compensation to recognize the recent fall in inflation compensation. The Committee retained the characterization of
the most likely outcomes as “sustained expansion of
economic activity, strong labor market conditions, and
inflation near the Committee’s symmetric 2 percent objective” but added a clause to emphasize that uncertainties about this outlook had increased. In describing the
monetary policy outlook, members agreed to remove the
“patient” language and to emphasize instead that, in light
of these uncertainties and muted inflation pressures, the
Committee would closely monitor the implications of incoming information for the economic outlook and
would act as appropriate to sustain the expansion, with
Minutes of the Meeting of June 18–19, 2019
Page 11
_____________________________________________________________________________________________
a strong labor market and inflation near its symmetric
2 percent objective.
At the conclusion of the discussion, the Committee
voted to authorize and direct the Federal Reserve Bank
of New York, until instructed otherwise, to execute
transactions in the System Open Market Account in accordance with the following domestic policy directive, to
be released at 2:00 p.m.:
“Effective June 20, 2019, the Federal Open
Market Committee directs the Desk to undertake open market operations as necessary to
maintain the federal funds rate in a target range
of 2¼ to 2½ percent, including overnight reverse repurchase operations (and reverse repurchase operations with maturities of more than
one day when necessary to accommodate weekend, holiday, or similar trading conventions) at
an offering rate of 2.25 percent, in amounts limited only by the value of Treasury securities held
outright in the System Open Market Account
that are available for such operations and by a
per-counterparty limit of $30 billion per day.
The Committee directs the Desk to continue
rolling over at auction the amount of principal
payments from the Federal Reserve’s holdings
of Treasury securities maturing during each calendar month that exceeds $15 billion, and to
continue reinvesting in agency mortgagebacked securities the amount of principal payments from the Federal Reserve’s holdings of
agency debt and agency mortgage-backed securities received during each calendar month that
exceeds $20 billion. Small deviations from
these amounts for operational reasons are acceptable.
The Committee also directs the Desk to engage
in dollar roll and coupon swap transactions as
necessary to facilitate settlement of the Federal
Reserve’s agency mortgage-backed securities
transactions.”
The vote also encompassed approval of the statement
below to be released at 2:00 p.m.:
“Information received since the Federal Open
Market Committee met in May indicates that
the labor market remains strong and that economic activity is rising at a moderate rate. Job
gains have been solid, on average, in recent
months, and the unemployment rate has remained low. Although growth of household
spending appears to have picked up from earlier
in the year, indicators of business fixed investment have been soft. On a 12-month basis,
overall inflation and inflation for items other
than food and energy are running below 2 percent. Market-based measures of inflation compensation have declined; survey-based measures
of longer-term inflation expectations are little
changed.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment
and price stability. In support of these goals,
the Committee decided to maintain the target
range for the federal funds rate at 2¼ to
2½ percent. The Committee continues to view
sustained expansion of economic activity,
strong labor market conditions, and inflation
near the Committee’s symmetric 2 percent objective as the most likely outcomes, but uncertainties about this outlook have increased. In
light of these uncertainties and muted inflation
pressures, the Committee will closely monitor
the implications of incoming information for
the economic outlook and will act as appropriate to sustain the expansion, with a strong labor
market and inflation near its symmetric 2 percent objective.
In determining the timing and size of future adjustments to the target range for the federal
funds rate, the Committee will assess realized
and expected economic conditions relative to its
maximum employment objective and its symmetric 2 percent inflation objective. This assessment will take into account a wide range of
information, including measures of labor market conditions, indicators of inflation pressures
and inflation expectations, and readings on financial and international developments.”
Voting for this action: Jerome H. Powell, John C.
Williams, Michelle W. Bowman, Lael Brainard, Richard
H. Clarida, Charles L. Evans, Esther L. George, Randal
K. Quarles, and Eric Rosengren.
Voting against this action: James Bullard.
Mr. Bullard dissented because he believed that the current stance of monetary policy could be better positioned to foster progress toward the Committee’s statutory objectives of maximum employment and stable
prices. Particularly in light of persistent low readings on
inflation and from indicators of inflation expectations
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Federal Open Market Committee
_____________________________________________________________________________________________
along with the risks to the U.S. outlook associated with
global economic developments, he noted that a policy
rate reduction at the current meeting would help re-center inflation and inflation expectations at levels consistent with the Committee’s symmetric 2 percent inflation objective and simultaneously provide some insurance against unexpected developments that could slow
U.S. economic growth.
Consistent with the Committee’s decision to leave the
target range for the federal funds rate unchanged, the
Board of Governors voted unanimously to leave the interest rates on required and excess reserve balances unchanged at 2.35 percent and voted unanimously to approve establishment of the primary credit rate at the existing level of 3.00 percent, effective June 20, 2019.
Update from Subcommittee on Communications
Governor Clarida provided a brief update on the work
of the subcommittee on communications. The Fed Listens conferences conducted to date were viewed as successful in identifying many important issues for the stra-
tegic review of monetary policy strategy, tools, and communications. Additional Fed Listens events were
planned over the remainder of the year. The Committee
was likely to begin internal deliberations on aspects of
the strategic review over coming FOMC meetings.
It was agreed that the next meeting of the Committee
would be held on Tuesday–Wednesday, July 30–31,
2019. The meeting adjourned at 10:05 a.m. on June 19,
2019.
Notation Vote
By notation vote completed on May 21, 2019, the Committee unanimously approved the minutes of the Committee meeting held on April 30–May 1, 2019.
_______________________
James A. Clouse
Secretary
Page 1
_____________________________________________________________________________________________
Summary of Economic Projections
In conjunction with the Federal Open Market Committee (FOMC) meeting held on June 18–19, 2019, meeting
participants submitted their projections of the most
likely outcomes for real gross domestic product (GDP)
growth, the unemployment rate, and inflation for each
year from 2019 to 2021 and over the longer run. Each
participant’s projections were based on information
available at the time of the meeting, together with his or
her assessment of appropriate monetary policy—including a path for the federal funds rate and its longer-run
value—and assumptions about other factors likely to affect economic outcomes. The longer-run projections
represent each participant’s assessment of the value to
which each variable would be expected to converge, over
time, under appropriate monetary policy and in the absence of further shocks to the economy. 1 “Appropriate
monetary policy” is defined as the future path of policy
that each participant deems most likely to foster outcomes for economic activity and inflation that best satisfy his or her individual interpretation of the statutory
mandate to promote maximum employment and price
stability.
Participants who submitted longer-run projections generally expected that, under appropriate monetary policy,
growth of real GDP in 2019 would run at or somewhat
above their individual estimates of its longer-run rate.
Thereafter, almost all participants expected real GDP
growth to edge down, with the vast majority of participants projecting growth in 2021 to be at or below their
estimates of its longer-run rate. All participants who
submitted longer-run projections continued to expect
that the unemployment rate would run at or below their
estimates of its longer-run level through 2021. Compared with the Summary of Economic Projections (SEP)
from March 2019, most participants revised down
slightly their projections for the unemployment rate
from 2019 through 2021. All participants marked down
somewhat their projections for 2019 for total inflation,
as measured by the four-quarter percent change in the
price index for personal consumption expenditures
(PCE), and almost all did so for their projections for
core inflation. All participants projected that inflation
would increase in 2020, from 2019, and a majority expected another slight increase in 2021. The vast majority
of participants expected that inflation would be at or
1 One participant did not submit longer-run projections for
real GDP growth, the unemployment rate, or the federal funds
rate.
slightly above the Committee’s 2 percent objective in
2021. Core PCE price inflation was also expected to increase over the projection period, rising to 2.0 percent in
2021. Table 1 and figure 1 provide summary statistics
for the projections.
As shown in figure 2, just over half of the participants
expected that the evolution of the economy, relative to
their objectives of maximum employment and 2 percent
inflation, would likely warrant keeping the federal funds
rate at or slightly above its current level through the end
of 2019; almost half projected that a lower level for the
federal funds rate would be appropriate by year-end.
The median of participants’ assessments of the appropriate level of the federal funds rate at the end of the
projection period was close to the median of their assessments of the longer-run federal funds rate level.
Nearly all participants lowered their projections for the
appropriate level of the federal funds rate, relative to
March, at some point in the forecast period. The medians for the federal funds rate for 2020 and 2021 were
50 basis points and 25 basis points lower than in March,
respectively. The median of projections for the long-run
normal level of the federal funds rate was 25 basis points
lower than in the March projections.
Most participants regarded the uncertainties around
their forecasts for GDP growth, total inflation, and core
inflation as broadly similar to the average of the past
20 years. About half of the participants viewed the level
of uncertainty around their unemployment rate projections as being similar to the average of the past 20 years,
and about the same number viewed uncertainty as
higher. Participants’ assessments of risks to their outlooks for output growth and the unemployment rate
shifted notably relative to their assessments in March.
As a result, most participants viewed the risks for GDP
growth as weighted to the downside and for the unemployment rate as weighted to the upside. About half of
participants viewed the risks to inflation as being broadly
balanced, with a similar number viewing inflation risks
as being weighted to the downside.
2.4
2.4
2.1
2.6
1.9
2.0
2.4
2.6
2.0
2.0
2.0
2.0
2.5
2.8
2.0
2.0
2.0
2.0
1.4 – 1.8 1.8 – 2.1 1.8 – 2.2
1.8 – 2.2 1.8 – 2.2 1.9 – 2.2
1.4 – 1.7 1.8 – 2.1 1.9 – 2.2
1.6 – 2.1 1.9 – 2.2 2.0 – 2.2
2.0
2.0
1.9 – 2.4 1.9 – 2.4 1.9 – 2.6 2.5 – 3.0 1.9 – 2.6 1.9 – 3.1 1.9 – 3.1 2.4 – 3.3
2.4 – 2.6 2.4 – 2.9 2.4 – 2.9 2.5 – 3.0 2.4 – 2.9 2.4 – 3.4 2.4 – 3.6 2.5 – 3.5
1.7 – 1.8 1.9 – 2.0 2.0 – 2.1
1.9 – 2.0 2.0 – 2.1 2.0 – 2.1
1.5 – 1.6 1.9 – 2.0 2.0 – 2.1
1.8 – 1.9 2.0 – 2.1 2.0 – 2.1
Note: Projections of change in real gross domestic product (GDP) and projections for both measures of inflation are percent changes from the
fourth quarter of the previous year to the fourth quarter of the year indicated. PCE inflation and core PCE inflation are the percentage rates of change
in, respectively, the price index for personal consumption expenditures (PCE) and the price index for PCE excluding food and energy. Projections for
the unemployment rate are for the average civilian unemployment rate in the fourth quarter of the year indicated. Each participant’s projections are
based on his or her assessment of appropriate monetary policy. Longer-run projections represent each participant’s assessment of the rate to which each
variable would be expected to converge under appropriate monetary policy and in the absence of further shocks to the economy. The projections for the
federal funds rate are the value of the midpoint of the projected appropriate target range for the federal funds rate or the projected appropriate target
level for the federal funds rate at the end of the specified calendar year or over the longer run. The March projections were made in conjunction with
the meeting of the Federal Open Market Committee on March 19–20, 2019. One participant did not submit longer-run projections for the change in real
GDP, the unemployment rate, or the federal funds rate in conjunction with the March 19–20, 2019, meeting, and one participant did not submit such
projections in conjunction with the June 18–19, 2019, meeting.
1. For each period, the median is the middle projection when the projections are arranged from lowest to highest. When the number of projections
is even, the median is the average of the two middle projections.
2. The central tendency excludes the three highest and three lowest projections for each variable in each year.
3. The range for a variable in a given year includes all participants’ projections, from lowest to highest, for that variable in that year.
4. Longer-run projections for core PCE inflation are not collected.
Federal funds rate
March projection
Memo: Projected
appropriate policy path
1.8
2.0
Core PCE inflation4
March projection
1.9
2.0
3.6 – 3.7 3.5 – 3.9 3.6 – 4.0 4.0 – 4.4 3.5 – 3.8 3.3 – 4.0 3.3 – 4.2 3.6 – 4.5
3.6 – 3.8 3.6 – 3.9 3.7 – 4.1 4.1 – 4.5 3.5 – 4.0 3.4 – 4.1 3.4 – 4.2 4.0 – 4.6
1.5
1.8
4.2
4.3
PCE inflation
March projection
3.8
3.9
Unemployment rate
March projection
3.7
3.8
3.6
3.7
Change in real GDP
March projection
Variable
Median1
Central tendency2
Range3
2019 2020 2021 Longer
2019
2020
2021
2019
2020
2021
Longer
Longer
run
run
run
2.1
2.0
1.8
1.9
2.0 – 2.2 1.8 – 2.2 1.8 – 2.0 1.8 – 2.0 2.0 – 2.4 1.5 – 2.3 1.5 – 2.1 1.7 – 2.1
2.1
1.9
1.8
1.9
1.9 – 2.2 1.8 – 2.0 1.7 – 2.0 1.8 – 2.0 1.6 – 2.4 1.7 – 2.2 1.5 – 2.2 1.7 – 2.2
Percent
Table 1. Economic projections of Federal Reserve Board members and Federal Reserve Bank presidents,
under their individual assessments of projected appropriate monetary policy, June 2019
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Federal Open Market Committee
_____________________________________________________________________________________________
Summary of Economic Projections of the Meeting of June 18–19, 2019
Page 3
_____________________________________________________________________________________________
Figure 1. Medians, central tendencies, and ranges of economic projections, 2019–21 and over the longer run
Percent
Change in real GDP
Median of projections
Central tendency of projections
Range of projections
3
Actual
2
1
2014
2015
2016
2017
2018
2019
2020
2021
Longer
run
Percent
Unemployment rate
7
6
5
4
3
2014
2015
2016
2017
2018
2019
2020
2021
Longer
run
Percent
PCE inflation
3
2
1
2014
2015
2016
2017
2018
2019
2020
2021
Longer
run
Percent
Core PCE inflation
3
2
1
2014
2015
2016
2017
2018
2019
2020
2021
Longer
run
Note: Definitions of variables and other explanations are in the notes to table 1. The data for the actual values of
the variables are annual.
Page 4
Federal Open Market Committee
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Figure 2. FOMC participants’ assessments of appropriate monetary policy: Midpoint of target range or target level for
the federal funds rate
Percent
5.0
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
2019
2020
2021
Longer run
Note: Each shaded circle indicates the value (rounded to the nearest 1/8 percentage point) of an individual participant’s judgment of the midpoint of the appropriate target range for the federal funds rate or the appropriate target
level for the federal funds rate at the end of the specified calendar year or over the longer run. One participant did not
submit longer-run projections for the federal funds rate.
Summary of Economic Projections of the Meeting of June 18–19, 2019
Page 5
_____________________________________________________________________________________________
The Outlook for Real GDP Growth and Unemployment
As shown in table 1, the median of participants’ projections for the growth rate of real GDP in 2019, conditional on their individual assessments of appropriate
monetary policy, was 2.1 percent, a bit above the median
estimate of its longer-run rate of 1.9 percent. Almost all
participants continued to expect GDP growth to slow
over the projection period, with the median projection
at 2.0 percent in 2020 and at 1.8 percent in 2021. Relative to the March SEP, the medians of the projections
for real GDP growth in 2019, 2020, 2021, and the longer
run were little changed.
The median of projections for the unemployment rate in
the fourth quarter of 2019 was 3.6 percent, about ½ percentage point below the median assessment of its longerrun level of 4.2 percent. The medians of projections for
2020 and 2021 were 3.7 percent and 3.8 percent, respectively. These median unemployment rates, along with
the median for the unemployment rate in the longer run,
were a little lower than those from the March SEP. As
was the case in March, almost all participants who submitted longer-run projections expected that the unemployment rate in 2021 would be below their estimates of
its longer-run level.
Figures 3.A and 3.B show the distributions of participants’ projections for real GDP growth and the unemployment rate from 2019 to 2021 and in the longer run.
The distribution of individual projections for real GDP
growth for 2019 through 2021 all shifted up modestly
relative to that in the March SEP. The distribution for
the longer-run growth rate was little changed. The distributions of individual projections for the unemployment rate in 2019 and 2020 moved lower relative to
those in March, and the distribution in 2021 edged down
as well. Meanwhile, the distribution for the longer-run
unemployment rate shifted down a touch.
The Outlook for Inflation
As shown in table 1, the median of projections for total
PCE price inflation was 1.5 percent in 2019, notably
lower than in the March SEP, while the median for 2020,
at 1.9 percent, was a touch lower than in March. The
median for total inflation for 2021 was unchanged from
March at 2.0 percent. The medians of projections for
core PCE price inflation for 2019 and 2020 were 1.8 percent and 1.9 percent, respectively, both a little lower relative to the March SEP. The median for 2021 was
2.0 percent, unchanged from the March SEP.
Figures 3.C and 3.D provide information on the distributions of participants’ views about the outlook for inflation. The distributions of projections for total PCE
price inflation and core PCE price inflation in 2019
shifted down notably from the March SEP, while those
for 2020 and 2021 changed more modestly. Beyond the
current year, for which projections also reflect data in
hand, almost all participants expected total and core
PCE price inflation to be between 1.9 and 2.2 percent.
Appropriate Monetary Policy
Figure 3.E shows distributions of participants’ judgments regarding the appropriate target—or midpoint of
the target range—for the federal funds rate at the end of
each year from 2019 to 2021 and over the longer run.
On the whole, the distributions for 2019 through 2021
shifted toward lower values. Almost all participants
viewed the appropriate levels of the federal funds rate at
the end of 2019, 2020, and 2021 as lower than those that
they deemed appropriate in March. Nearly all participants lowered their projections for the appropriate level
of the federal funds rate, relative to March, at some point
in the projection period, and none raised their projections for the federal funds rate for any year. Compared
with the projections prepared for the March SEP, the
median federal funds rate was 50 basis points lower in
2020, 25 basis points lower in 2021, and 25 basis points
lower in the longer-run. While the median of federal
funds rate projections at the end of 2019 remained at
2.38 percent, almost half of participants projected an appropriate level of the target range for the federal funds
rate at the end of 2019 that was 25 basis points or 50 basis points lower than at present. In subsequent years, the
medians of the projections were 2.13 percent at the end
of 2020 and 2.38 percent at the end of 2021, slightly
lower than the median of the longer-run projections of
the federal funds rate of 2.50 percent. Muted inflation
pressures and concerns about declining inflation expectations, trade developments, and foreign economic
growth, as well as weaker business fixed investment,
were cited as factors contributing to the downward revisions in participants’ assessments of the appropriate
path for the policy rate.
Uncertainty and Risks
In assessing the appropriate path of the federal funds
rate, FOMC participants take account of the range of
possible economic outcomes, the likelihood of those
outcomes, and the potential benefits and costs should
they occur. As a reference, table 2 provides measures of
forecast uncertainty—based on the forecast errors of
various private and government forecasts over the past
20 years—for real GDP growth, the unemployment
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Federal Open Market Committee
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Figure 3.A. Distribution of participants’ projections for the change in real GDP, 2019–21 and over the longer run
Number of participants
2019
June projections
March projections
18
16
14
12
10
8
6
4
2
1.4 1.5
1.6 1.7
1.8 1.9
2.0 2.1
2.2 2.3
2.4 2.5
Percent range
Number of participants
2020
18
16
14
12
10
8
6
4
2
1.4 1.5
1.6 1.7
1.8 1.9
2.0 2.1
2.2 2.3
2.4 2.5
Percent range
Number of participants
2021
18
16
14
12
10
8
6
4
2
1.4 1.5
1.6 1.7
1.8 1.9
2.0 2.1
2.2 2.3
2.4 2.5
Percent range
Number of participants
Longer run
18
16
14
12
10
8
6
4
2
1.4 1.5
1.6 1.7
1.8 1.9
2.0 2.1
2.2 2.3
Percent range
Note: Definitions of variables and other explanations are in the notes to table 1.
2.4 2.5
Summary of Economic Projections of the Meeting of June 18–19, 2019
Page 7
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Figure 3.B. Distribution of participants’ projections for the unemployment rate, 2019–21 and over the longer run
Number of participants
2019
June projections
March projections
18
16
14
12
10
8
6
4
2
3.0 3.1
3.2 3.3
3.4 3.5
3.6 3.7
3.8 3.9
4.0 4.1
4.2 4.3
4.4 4.5
4.6 4.7
4.8 4.9
5.0 5.1
Percent range
Number of participants
2020
18
16
14
12
10
8
6
4
2
3.0 3.1
3.2 3.3
3.4 3.5
3.6 3.7
3.8 3.9
4.0 4.1
4.2 4.3
4.4 4.5
4.6 4.7
4.8 4.9
5.0 5.1
Percent range
Number of participants
2021
18
16
14
12
10
8
6
4
2
3.0 3.1
3.2 3.3
3.4 3.5
3.6 3.7
3.8 3.9
4.0 4.1
4.2 4.3
4.4 4.5
4.6 4.7
4.8 4.9
5.0 5.1
Percent range
Number of participants
Longer run
18
16
14
12
10
8
6
4
2
3.0 3.1
3.2 3.3
3.4 3.5
3.6 3.7
3.8 3.9
4.0 4.1
4.2 4.3
4.4 4.5
Percent range
Note: Definitions of variables and other explanations are in the notes to table 1.
4.6 4.7
4.8 4.9
5.0 5.1
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Federal Open Market Committee
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Figure 3.C. Distribution of participants’ projections for PCE inflation, 2019–21 and over the longer run
Number of participants
2019
June projections
March projections
18
16
14
12
10
8
6
4
2
1.3 1.4
1.5 1.6
1.7 1.8
1.9 2.0
2.1 2.2
Percent range
Number of participants
2020
18
16
14
12
10
8
6
4
2
1.3 1.4
1.5 1.6
1.7 1.8
1.9 2.0
2.1 2.2
Percent range
Number of participants
2021
18
16
14
12
10
8
6
4
2
1.3 1.4
1.5 1.6
1.7 1.8
1.9 2.0
2.1 2.2
Percent range
Number of participants
Longer run
18
16
14
12
10
8
6
4
2
1.3 1.4
1.5 1.6
1.7 1.8
1.9 2.0
Percent range
Note: Definitions of variables and other explanations are in the notes to table 1.
2.1 2.2
Summary of Economic Projections of the Meeting of June 18–19, 2019
Page 9
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Figure 3.D. Distribution of participants’ projections for core PCE inflation, 2019–21
Number of participants
2019
June projections
March projections
18
16
14
12
10
8
6
4
2
1.3 1.4
1.5 1.6
1.7 1.8
1.9 2.0
2.1 2.2
Percent range
Number of participants
2020
18
16
14
12
10
8
6
4
2
1.3 1.4
1.5 1.6
1.7 1.8
1.9 2.0
2.1 2.2
Percent range
Number of participants
2021
18
16
14
12
10
8
6
4
2
1.3 1.4
1.5 1.6
1.7 1.8
1.9 2.0
Percent range
Note: Definitions of variables and other explanations are in the notes to table 1.
2.1 2.2
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Figure 3.E. Distribution of participants’ judgments of the midpoint of the appropriate target range for the federal funds
rate or the appropriate target level for the federal funds rate, 2019–21 and over the longer run
Number of participants
2019
June projections
March projections
18
16
14
12
10
8
6
4
2
1.88 2.12
2.13 2.37
2.38 2.62
2.63 2.87
2.88 3.12
3.13 3.37
3.38 3.62
3.63 3.87
3.88 4.12
4.13 4.37
4.38 4.62
4.63 4.87
4.88 5.12
Percent range
Number of participants
2020
18
16
14
12
10
8
6
4
2
1.88 2.12
2.13 2.37
2.38 2.62
2.63 2.87
2.88 3.12
3.13 3.37
3.38 3.62
3.63 3.87
3.88 4.12
4.13 4.37
4.38 4.62
4.63 4.87
4.88 5.12
Percent range
Number of participants
2021
18
16
14
12
10
8
6
4
2
1.88 2.12
2.13 2.37
2.38 2.62
2.63 2.87
2.88 3.12
3.13 3.37
3.38 3.62
3.63 3.87
3.88 4.12
4.13 4.37
4.38 4.62
4.63 4.87
4.88 5.12
Percent range
Number of participants
Longer run
18
16
14
12
10
8
6
4
2
1.88 2.12
2.13 2.37
2.38 2.62
2.63 2.87
2.88 3.12
3.13 3.37
3.38 3.62
3.63 3.87
3.88 4.12
4.13 4.37
Percent range
Note: Definitions of variables and other explanations are in the notes to table 1.
4.38 4.62
4.63 4.87
4.88 5.12
Summary of Economic Projections of the Meeting of June 18–19, 2019
Page 11
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Table 2. Average historical projection error ranges
Percentage points
Variable
2019
2020
2021
Change in real GDP1 . . . . . . .
±1.3
±1.8
±2.0
±0.4
±1.2
±1.8
±0.7
±1.0
±1.0
±0.7
±1.9
±2.2
Unemployment
rate1
.......
Total consumer
prices2
.....
Short-term interest rates3 . . . .
NOTE: Error ranges shown are measured as plus or minus the root
mean squared error of projections for 1999 through 2018 that were released in the summer by various private and government forecasters. As
described in the box “Forecast Uncertainty,” under certain assumptions,
there is about a 70 percent probability that actual outcomes for real
GDP, unemployment, consumer prices, and the federal funds rate will
be in ranges implied by the average size of projection errors made in the
past. For more information, see David Reifschneider and Peter Tulip
(2017), “Gauging the Uncertainty of the Economic Outlook Using Historical Forecasting Errors: The Federal Reserve’s Approach,” Finance
and Economics Discussion Series 2017-020 (Washington: Board of
Governors of the Federal Reserve System, February), https://dx.
doi.org/10.17016/FEDS.2017.020.
1. Definitions of variables are in the general note to table 1.
2. Measure is the overall consumer price index, the price measure
that has been most widely used in government and private economic
forecasts. Projections are percent changes on a fourth quarter to fourth
quarter basis.
3. For Federal Reserve staff forecasts, measure is the federal funds
rate. For other forecasts, measure is the rate on 3-month Treasury bills.
Projection errors are calculated using average levels, in percent, in the
fourth quarter.
rate, and total PCE price inflation. Those measures are
represented graphically in the “fan charts” shown in the
top panels of figures 4.A, 4.B, and 4.C. The fan charts
display the SEP medians for the three variables surrounded by symmetric confidence intervals derived
from the forecast errors reported in table 2. If the degree of uncertainty attending these projections is similar
to the typical magnitude of past forecast errors and the
risks around the projections are broadly balanced, then
future outcomes of these variables would have about a
70 percent probability of being within these confidence
intervals. For all three variables, this measure of uncertainty is substantial and generally increases as the forecast horizon lengthens.
Participants’ assessments of the level of uncertainty surrounding their individual economic projections are
shown in the bottom-left panels of figures 4.A, 4.B, and
4.C. The vast majority of participants continued to view
the uncertainty around their projections for inflation as
broadly similar to the average of the past 20 years; most
also viewed uncertainty around their projections for
GDP growth as similar to the average of the past
20 years. Views on uncertainty around unemployment
At the end of this summary, the box “Forecast Uncertainty”
discusses the sources and interpretation of uncertainty surrounding the economic forecasts and explains the approach
2
rate projections were roughly evenly distributed between
those who saw similar levels of uncertainty relative to the
historical average and those who saw higher uncertainty. 2
Because the fan charts are constructed to be symmetric
around the median projections, they do not reflect any
asymmetries in the balance of risks that participants may
see in their economic projections. Participants’ assessments of the balance of risks to their current economic
projections are shown in the bottom-right panels of figures 4.A, 4.B, and 4.C. The balance of risks to the projection for real GDP growth shifted lower, with 14 participants assessing the risks as weighted to the downside,
3 assessing them to be broadly balanced, and no participant seeing them as weighted to the upside. Similarly,
the balance of risks to the projection for the unemployment rate moved higher, with 12 participants judging the
risks to the unemployment rate as weighted to the upside
and 5 participants viewing the risks as broadly balanced.
In addition, the balance of risks to the inflation projections shifted down relative to March. Six more participants than in March saw the risks to the inflation projections as weighted to the downside, and no participant
judged the risks as weighted to the upside.
In discussing the uncertainty and risks surrounding their
economic projections, trade developments, concerns
about global economic growth, and weaker business
fixed investment were mentioned by participants as
sources of uncertainty or downside risk to the U.S. economic growth outlook. For the inflation outlook, the
effect of trade developments was cited as a source of upside risk, while the possibility that inflation expectations
could be drifting below levels consistent with the
FOMC’s 2 percent inflation objective or the potential
for a stronger dollar or weaker domestic demand to put
downward pressure on inflation were viewed as downside risks. A number of participants mentioned that
their assessments of risks remained roughly balanced in
part because the downward revisions to their appropriate path for the federal funds rate were offsetting factors
that would otherwise contribute to asymmetric risks.
Participants’ assessments of the appropriate future path
of the federal funds rate are also subject to considerable
uncertainty. Because the Committee adjusts the federal
funds rate in response to actual and prospective developments over time in key economic variables such as
real GDP growth, the unemployment rate, and inflation,
used to assess the uncertainty and risks attending the participants’ projections.
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Figure 4.A. Uncertainty and risks in projections of GDP growth
Median projection and confidence interval based on historical forecast errors
Percent
Change in real GDP
Median of projections
70% confidence interval
4
3
2
Actual
1
0
2014
2015
2016
2017
2018
2019
2020
2021
FOMC participants’ assessments of uncertainty and risks around their economic projections
Number of participants
Uncertainty about GDP growth
Risks to GDP growth
June projections
March projections
Lower
18
Broadly
similar
Number of participants
Higher
June projections
March projections
18
16
16
14
14
12
12
10
10
8
8
6
6
4
4
2
2
Weighted to
downside
Broadly
balanced
Weighted to
upside
Note: The blue and red lines in the top panel show actual values and median projected values, respectively, of the
percent change in real gross domestic product (GDP) from the fourth quarter of the previous year to the fourth quarter
of the year indicated. The confidence interval around the median projected values is assumed to be symmetric and is
based on root mean squared errors of various private and government forecasts made over the previous 20 years; more
information about these data is available in table 2. Because current conditions may differ from those that prevailed,
on average, over the previous 20 years, the width and shape of the confidence interval estimated on the basis of the
historical forecast errors may not reflect FOMC participants’ current assessments of the uncertainty and risks around
their projections; these current assessments are summarized in the lower panels. Generally speaking, participants who
judge the uncertainty about their projections as “broadly similar” to the average levels of the past 20 years would view
the width of the confidence interval shown in the historical fan chart as largely consistent with their assessments of
the uncertainty about their projections. Likewise, participants who judge the risks to their projections as “broadly
balanced” would view the confidence interval around their projections as approximately symmetric. For definitions of
uncertainty and risks in economic projections, see the box “Forecast Uncertainty.”
Summary of Economic Projections of the Meeting of June 18–19, 2019
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Figure 4.B. Uncertainty and risks in projections of the unemployment rate
Median projection and confidence interval based on historical forecast errors
Percent
Unemployment rate
10
Median of projections
70% confidence interval
9
8
7
6
5
Actual
4
3
2
1
2014
2015
2016
2017
2018
2019
2020
2021
FOMC participants’ assessments of uncertainty and risks around their economic projections
Number of participants
Uncertainty about the unemployment rate
Risks to the unemployment rate
June projections
March projections
Lower
18
Broadly
similar
Number of participants
Higher
June projections
March projections
18
16
16
14
14
12
12
10
10
8
8
6
6
4
4
2
2
Weighted to
downside
Broadly
balanced
Weighted to
upside
Note: The blue and red lines in the top panel show actual values and median projected values, respectively, of
the average civilian unemployment rate in the fourth quarter of the year indicated. The confidence interval around
the median projected values is assumed to be symmetric and is based on root mean squared errors of various private
and government forecasts made over the previous 20 years; more information about these data is available in table 2.
Because current conditions may differ from those that prevailed, on average, over the previous 20 years, the width
and shape of the confidence interval estimated on the basis of the historical forecast errors may not reflect FOMC
participants’ current assessments of the uncertainty and risks around their projections; these current assessments are
summarized in the lower panels. Generally speaking, participants who judge the uncertainty about their projections as
“broadly similar” to the average levels of the past 20 years would view the width of the confidence interval shown in the
historical fan chart as largely consistent with their assessments of the uncertainty about their projections. Likewise,
participants who judge the risks to their projections as “broadly balanced” would view the confidence interval around
their projections as approximately symmetric. For definitions of uncertainty and risks in economic projections, see the
box “Forecast Uncertainty.”
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Figure 4.C. Uncertainty and risks in projections of PCE inflation
Median projection and confidence interval based on historical forecast errors
Percent
PCE inflation
Median of projections
70% confidence interval
3
2
1
Actual
0
2014
2015
2016
2017
2018
2019
2020
2021
FOMC participants’ assessments of uncertainty and risks around their economic projections
Number of participants
Uncertainty about PCE inflation
Risks to PCE inflation
June projections
March projections
Lower
18
Broadly
similar
Number of participants
June projections
March projections
18
16
16
14
14
12
12
10
10
8
8
6
6
4
4
2
2
Higher
Weighted to
downside
Broadly
balanced
Number of participants
Uncertainty about core PCE inflation
18
Broadly
similar
Number of participants
Risks to core PCE inflation
June projections
March projections
Lower
Weighted to
upside
Higher
June projections
March projections
18
16
16
14
14
12
12
10
10
8
8
6
6
4
4
2
2
Weighted to
downside
Broadly
balanced
Weighted to
upside
Note: The blue and red lines in the top panel show actual values and median projected values, respectively, of the
percent change in the price index for personal consumption expenditures (PCE) from the fourth quarter of the previous
year to the fourth quarter of the year indicated. The confidence interval around the median projected values is assumed
to be symmetric and is based on root mean squared errors of various private and government forecasts made over the
previous 20 years; more information about these data is available in table 2. Because current conditions may differ from
those that prevailed, on average, over the previous 20 years, the width and shape of the confidence interval estimated
on the basis of the historical forecast errors may not reflect FOMC participants’ current assessments of the uncertainty
and risks around their projections; these current assessments are summarized in the lower panels. Generally speaking,
participants who judge the uncertainty about their projections as “broadly similar” to the average levels of the past
20 years would view the width of the confidence interval shown in the historical fan chart as largely consistent with their
assessments of the uncertainty about their projections. Likewise, participants who judge the risks to their projections
as “broadly balanced” would view the confidence interval around their projections as approximately symmetric. For
definitions of uncertainty and risks in economic projections, see the box “Forecast Uncertainty.”
Summary of Economic Projections of the Meeting of June 18–19, 2019
Page 15
_____________________________________________________________________________________________
uncertainty surrounding the projected path for the federal funds rate importantly reflects the uncertainties
about the paths for these economic variables along with
other factors. Figure 5 provides a graphical representation of this uncertainty, plotting the SEP median for the
federal funds rate surrounded by confidence intervals
derived from the results presented in table 2. As with
the macroeconomic variables, the forecast uncertainty
surrounding the appropriate path of the federal funds
rate is substantial and increases for longer horizons.
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Federal Open Market Committee
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Figure 5. Uncertainty in projections of the federal funds rate
Median projection and confidence interval based on historical forecast errors
Percent
Federal funds rate
Midpoint of target range
Median of projections
70% confidence interval*
6
5
4
3
2
1
Actual
0
2014
2015
2016
2017
2018
2019
2020
2021
Note: The blue and red lines are based on actual values and median projected values, respectively, of the Committee’s target for the federal funds rate at the end of the year indicated. The actual values are the midpoint of the
target range; the median projected values are based on either the midpoint of the target range or the target level.
The confidence interval around the median projected values is based on root mean squared errors of various private
and government forecasts made over the previous 20 years. The confidence interval is not strictly consistent with the
projections for the federal funds rate, primarily because these projections are not forecasts of the likeliest outcomes for
the federal funds rate, but rather projections of participants’ individual assessments of appropriate monetary policy.
Still, historical forecast errors provide a broad sense of the uncertainty around the future path of the federal funds rate
generated by the uncertainty about the macroeconomic variables as well as additional adjustments to monetary policy
that may be appropriate to offset the effects of shocks to the economy.
The confidence interval is assumed to be symmetric except when it is truncated at zero—the bottom of the lowest
target range for the federal funds rate that has been adopted in the past by the Committee. This truncation would
not be intended to indicate the likelihood of the use of negative interest rates to provide additional monetary policy
accommodation if doing so was judged appropriate. In such situations, the Committee could also employ other tools,
including forward guidance and large-scale asset purchases, to provide additional accommodation. Because current
conditions may differ from those that prevailed, on average, over the previous 20 years, the width and shape of the
confidence interval estimated on the basis of the historical forecast errors may not reflect FOMC participants’ current
assessments of the uncertainty and risks around their projections.
* The confidence interval is derived from forecasts of the average level of short-term interest rates in the fourth
quarter of the year indicated; more information about these data is available in table 2. The shaded area encompasses
less than a 70 percent confidence interval if the confidence interval has been truncated at zero.
Summary of Economic Projections of the Meeting of June 18–19, 2019
Page 17
_____________________________________________________________________________________________
Forecast Uncertainty
The economic projections provided by the members of
the Board of Governors and the presidents of the Federal
Reserve Banks inform discussions of monetary policy among
policymakers and can aid public understanding of the basis
for policy actions. Considerable uncertainty attends these
projections, however. The economic and statistical models
and relationships used to help produce economic forecasts
are necessarily imperfect descriptions of the real world, and
the future path of the economy can be affected by myriad
unforeseen developments and events. Thus, in setting the
stance of monetary policy, participants consider not only
what appears to be the most likely economic outcome as embodied in their projections, but also the range of alternative
possibilities, the likelihood of their occurring, and the potential costs to the economy should they occur.
Table 2 summarizes the average historical accuracy of a
range of forecasts, including those reported in past Monetary
Policy Reports and those prepared by the Federal Reserve
Board’s staff in advance of meetings of the Federal Open
Market Committee (FOMC). The projection error ranges
shown in the table illustrate the considerable uncertainty associated with economic forecasts. For example, suppose a
participant projects that real gross domestic product (GDP)
and total consumer prices will rise steadily at annual rates of,
respectively, 3 percent and 2 percent. If the uncertainty attending those projections is similar to that experienced in the
past and the risks around the projections are broadly balanced, the numbers reported in table 2 would imply a probability of about 70 percent that actual GDP would expand
within a range of 1.7 to 4.3 percent in the current year, 1.2 to
4.8 percent in the second year, and 1.0 to 5.0 percent in the
third year. The corresponding 70 percent confidence intervals for overall inflation would be 1.3 to 2.7 percent in the
current year and 1.0 to 3.0 percent in the second and third
years. Figures 4.A through 4.C illustrate these confidence
bounds in “fan charts” that are symmetric and centered on
the medians of FOMC participants’ projections for GDP
growth, the unemployment rate, and inflation. However, in
some instances, the risks around the projections may not be
symmetric. In particular, the unemployment rate cannot be
negative; furthermore, the risks around a particular projection might be tilted to either the upside or the downside, in
which case the corresponding fan chart would be asymmetrically positioned around the median projection.
Because current conditions may differ from those that
prevailed, on average, over history, participants provide
judgments as to whether the uncertainty attached to their
projections of each economic variable is greater than, smaller
than, or broadly similar to typical levels of forecast uncertainty seen in the past 20 years, as presented in table 2 and
reflected in the widths of the confidence intervals shown in
the top panels of figures 4.A through 4.C. Participants’ current assessments of the uncertainty surrounding their projec-
tions are summarized in the bottom-left panels of those figures. Participants also provide judgments as to whether the
risks to their projections are weighted to the upside, are
weighted to the downside, or are broadly balanced. That is,
while the symmetric historical fan charts shown in the top
panels of figures 4.A through 4.C imply that the risks to participants’ projections are balanced, participants may judge that
there is a greater risk that a given variable will be above rather
than below their projections. These judgments are summarized in the lower-right panels of figures 4.A through 4.C.
As with real activity and inflation, the outlook for the
future path of the federal funds rate is subject to considerable
uncertainty. This uncertainty arises primarily because each
participant’s assessment of the appropriate stance of monetary policy depends importantly on the evolution of real activity and inflation over time. If economic conditions evolve
in an unexpected manner, then assessments of the appropriate setting of the federal funds rate would change from that
point forward. The final line in table 2 shows the error ranges
for forecasts of short-term interest rates. They suggest that
the historical confidence intervals associated with projections
of the federal funds rate are quite wide. It should be noted,
however, that these confidence intervals are not strictly consistent with the projections for the federal funds rate, as these
projections are not forecasts of the most likely quarterly outcomes but rather are projections of participants’ individual assessments of appropriate monetary policy and are on an endof-year basis. However, the forecast errors should provide a
sense of the uncertainty around the future path of the federal
funds rate generated by the uncertainty about the macroeconomic variables as well as additional adjustments to monetary
policy that would be appropriate to offset the effects of
shocks to the economy.
If at some point in the future the confidence interval
around the federal funds rate were to extend below zero, it
would be truncated at zero for purposes of the fan chart
shown in figure 5; zero is the bottom of the lowest target
range for the federal funds rate that has been adopted by the
Committee in the past. This approach to the construction of
the federal funds rate fan chart would be merely a convention;
it would not have any implications for possible future policy
decisions regarding the use of negative interest rates to provide additional monetary policy accommodation if doing so
were appropriate. In such situations, the Committee could
also employ other tools, including forward guidance and asset
purchases, to provide additional accommodation.
While figures 4.A through 4.C provide information on
the uncertainty around the economic projections, figure 1
provides information on the range of views across FOMC
participants. A comparison of figure 1 with figures 4.A
through 4.C shows that the dispersion of the projections
across participants is much smaller than the average forecast
errors over the past 20 years.
Cite this document
Federal Reserve (2019, June 18). FOMC Minutes. Fomc Minutes, Federal Reserve. https://whenthefedspeaks.com/doc/fomc_minutes_20190619
@misc{wtfs_fomc_minutes_20190619,
author = {Federal Reserve},
title = {FOMC Minutes},
year = {2019},
month = {Jun},
howpublished = {Fomc Minutes, Federal Reserve},
url = {https://whenthefedspeaks.com/doc/fomc_minutes_20190619},
note = {Retrieved via When the Fed Speaks corpus}
}