September 28, 2022
Fed officials have a very wide range of projections for Fed policy two years from now.

One of the things that went largely unnoticed about yesterday’s Federal Open Market Committee (FOMC) is how little consensus there is about the median term future.

Fed officials are in very close agreement about the path of the Federal Funds rate this year and next year, according to the dot plot of the Summary of Economic Projections (SEP). Eight of the FOMC participants see the target range between four and 4.25 percent, and nine see the range at 4.25 to 4.50 percent. One outlier sees it a quarter point higher, and one sees it a quarter point lower.

There are three levels that get a lot of support for the end of 2023 projection. There are six FOMC participants who foresee a range of 4.25 to 4.50 percent, six who see 4.50 to 4.75, and six who see 4.75 to 5.00 percent. One outlier sees the target range between 3.75 and four percent. The point is that the Fed’s projections are pretty tightly clustered around three positions that are themselves close to one another.

Now look out to 2024. There’s no consensus at all. There are two officials each for each of the three quarter-point increments between 4.75 to 4.50 percent and 4.25 and four. There are four for 3.75 to four percent. Three each for the next two quarter-point increments below that. At the bottom there is one participant for each of the three quarter-point increments from 3.25 to three percent to 2.75 to 2.5 percent. The projections, in other words, are all over the place.

This was not always the case. In the prior SEP, released back in June, there were eight forecasts at the 3.35 percent to 3.50 percent range. There were still outliers above and below that, but it was clear there was a centrist view. Now there really isn’t. The most popular view at the September meeting—3.75 to four percent—attracts half as many participants as the most popular view did in June.

To put it slightly differently, back in June, there were half as many hawks with projections above the most popular view. There were six doves below the most popular view. Now the hawks and doves outnumber the center in both directions.

It’s no wonder Fed Chair Jerome Powell continuously emphasized just how uncertain the future is. As he put it on Wednesday, “These projections do not represent a Committee decision or plan, and no one knows with any certainty where the economy will be a year or more from now.”