For release at 2:00 p.m.

, EDT, September 20, 2023

Summary of Economic Projections

In conjunction with the Federal Open Market Committee (FOMC) meeting held on
September 19–20, 2023, 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 2023 to 2026 and over the longer run. Each
participant’s projections were based on information available at the time of the meeting,
together with her or his 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. “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.

Page 1 of 17
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Table 1. Economic projections of Federal Reserve Board members and Federal Reserve Bank presidents,
under their individual assumptions of projected appropriate monetary policy, September 2023

Percent
Median1 Central Tendency2 Range3
Variable 2023 2024 2025 2026 Longer 2023 2024 2025 2026 Longer 2023 2024 2025 2026 Longer
run run run
Change in real GDP 2.1 1.5 1.8 1.8 1.8 1.9–2.2 1.2–1.8 1.6–2.0 1.7–2.0 1.7–2.0 1.8–2.6 0.4–2.5 1.4–2.5 1.6–2.5 1.6–2.5
June projection 1.0 1.1 1.8 1.8 0.7–1.2 0.9–1.5 1.6–2.0 1.7–2.0 0.5–2.0 0.5–2.2 1.5–2.2 1.6–2.5
Unemployment rate 3.8 4.1 4.1 4.0 4.0 3.7–3.9 3.9–4.4 3.9–4.3 3.8–4.3 3.8–4.3 3.7–4.0 3.7–4.5 3.7–4.7 3.7–4.5 3.5–4.3
June projection 4.1 4.5 4.5 4.0 4.0–4.3 4.3–4.6 4.3–4.6 3.8–4.3 3.9–4.5 4.0–5.0 3.8–4.9 3.5–4.4
PCE inflation 3.3 2.5 2.2 2.0 2.0 3.2–3.4 2.3–2.7 2.0–2.3 2.0–2.2 2.0 3.1–3.8 2.1–3.5 2.0–2.9 2.0–2.7 2.0
June projection 3.2 2.5 2.1 2.0 3.0–3.5 2.3–2.8 2.0–2.4 2.0 2.9–4.1 2.1–3.5 2.0–3.0 2.0
Core PCE inflation4 3.7 2.6 2.3 2.0 3.6–3.9 2.5–2.8 2.0–2.4 2.0–2.3 3.5–4.2 2.3–3.6 2.0–3.0 2.0–2.9
June projection 3.9 2.6 2.2 3.7–4.2 2.5–3.1 2.0–2.4 3.6–4.5 2.2–3.6 2.0–3.0
Memo: Projected
appropriate policy path
Federal funds rate 5.6 5.1 3.9 2.9 2.5 5.4–5.6 4.6–5.4 3.4–4.9 2.5–4.1 2.5–3.3 5.4–5.6 4.4–6.1 2.6–5.6 2.4–4.9 2.4–3.8
June projection 5.6 4.6 3.4 2.5 5.4–5.6 4.4–5.1 2.9–4.1 2.5–2.8 5.1–6.1 3.6–5.9 2.4–5.6 2.4–3.6

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 June projections were made in conjunction with the meeting of the Federal Open Market Committee on June 13–14, 2023. 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 June 13–14, 2023, meeting, and one
participant did not submit such projections in conjunction with the September 19–20, 2023, 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.

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Figure 1. Medians, central tendencies, and ranges of economic projections, 2023–26 and over the longer run

Percent
Change in real GDP 6
5
Actual 4
3
2
1
0
Median of projections −1
Central tendency of projections −2
Range of projections
−3

2018 2019 2020 2021 2022 2023 2024 2025 2026 Longer
run

Percent
Unemployment rate
7

2018 2019 2020 2021 2022 2023 2024 2025 2026 Longer
run

Percent
PCE inflation
7

2018 2019 2020 2021 2022 2023 2024 2025 2026 Longer
run

Percent
Core PCE inflation
7

2018 2019 2020 2021 2022 2023 2024 2025 2026 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.

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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
7.0

6.5

6.0

5.5

5.0

4.5

4.0

3.5

3.0

2.5

2.0

1.5

1.0

0.5

0.0

2023 2024 2025 2026 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.

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Figure 3.A. Distribution of participants’ projections for the change in real GDP, 2023–26 and over the longer run

Number of participants

2023
20
September projections 18
June projections 16
14
12
10
8
6
4
2
0.2− 0.4− 0.6− 0.8− 1.0− 1.2− 1.4− 1.6− 1.8− 2.0− 2.2− 2.4− 2.6−
0.3 0.5 0.7 0.9 1.1 1.3 1.5 1.7 1.9 2.1 2.3 2.5 2.7
Percent range
Number of participants

2024
20
18
16
14
12
10
8
6
4
2
0.2− 0.4− 0.6− 0.8− 1.0− 1.2− 1.4− 1.6− 1.8− 2.0− 2.2− 2.4− 2.6−
0.3 0.5 0.7 0.9 1.1 1.3 1.5 1.7 1.9 2.1 2.3 2.5 2.7
Percent range
Number of participants

2025
20
18
16
14
12
10
8
6
4
2
0.2− 0.4− 0.6− 0.8− 1.0− 1.2− 1.4− 1.6− 1.8− 2.0− 2.2− 2.4− 2.6−
0.3 0.5 0.7 0.9 1.1 1.3 1.5 1.7 1.9 2.1 2.3 2.5 2.7
Percent range
Number of participants

2026
20
18
16
14
12
10
8
6
4
2
0.2− 0.4− 0.6− 0.8− 1.0− 1.2− 1.4− 1.6− 1.8− 2.0− 2.2− 2.4− 2.6−
0.3 0.5 0.7 0.9 1.1 1.3 1.5 1.7 1.9 2.1 2.3 2.5 2.7
Percent range
Number of participants

Longer run
20
18
16
14
12
10
8
6
4
2
0.2− 0.4− 0.6− 0.8− 1.0− 1.2− 1.4− 1.6− 1.8− 2.0− 2.2− 2.4− 2.6−
0.3 0.5 0.7 0.9 1.1 1.3 1.5 1.7 1.9 2.1 2.3 2.5 2.7
Percent range

Note: Definitions of variables and other explanations are in the notes to table 1.

Page 5 of 17
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Figure 3.B. Distribution of participants’ projections for the unemployment rate, 2023–26 and over the longer run

Number of participants

2023
20
September projections 18
June projections 16
14
12
10
8
6
4
2
3.2− 3.4− 3.6− 3.8− 4.0− 4.2− 4.4− 4.6− 4.8− 5.0−
3.3 3.5 3.7 3.9 4.1 4.3 4.5 4.7 4.9 5.1
Percent range
Number of participants

2024
20
18
16
14
12
10
8
6
4
2
3.2− 3.4− 3.6− 3.8− 4.0− 4.2− 4.4− 4.6− 4.8− 5.0−
3.3 3.5 3.7 3.9 4.1 4.3 4.5 4.7 4.9 5.1
Percent range
Number of participants

2025
20
18
16
14
12
10
8
6
4
2
3.2− 3.4− 3.6− 3.8− 4.0− 4.2− 4.4− 4.6− 4.8− 5.0−
3.3 3.5 3.7 3.9 4.1 4.3 4.5 4.7 4.9 5.1
Percent range
Number of participants

2026
20
18
16
14
12
10
8
6
4
2
3.2− 3.4− 3.6− 3.8− 4.0− 4.2− 4.4− 4.6− 4.8− 5.0−
3.3 3.5 3.7 3.9 4.1 4.3 4.5 4.7 4.9 5.1
Percent range
Number of participants

Longer run
20
18
16
14
12
10
8
6
4
2
3.2− 3.4− 3.6− 3.8− 4.0− 4.2− 4.4− 4.6− 4.8− 5.0−
3.3 3.5 3.7 3.9 4.1 4.3 4.5 4.7 4.9 5.1
Percent range

Note: Definitions of variables and other explanations are in the notes to table 1.

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Figure 3.C. Distribution of participants’ projections for PCE inflation, 2023–26 and over the longer run

Number of participants

2023
20
September projections 18
June projections 16
14
12
10
8
6
4
2
1.7− 1.9− 2.1− 2.3− 2.5− 2.7− 2.9− 3.1− 3.3− 3.5− 3.7− 3.9− 4.1−
1.8 2.0 2.2 2.4 2.6 2.8 3.0 3.2 3.4 3.6 3.8 4.0 4.2
Percent range
Number of participants

2024
20
18
16
14
12
10
8
6
4
2
1.7− 1.9− 2.1− 2.3− 2.5− 2.7− 2.9− 3.1− 3.3− 3.5− 3.7− 3.9− 4.1−
1.8 2.0 2.2 2.4 2.6 2.8 3.0 3.2 3.4 3.6 3.8 4.0 4.2
Percent range
Number of participants

2025
20
18
16
14
12
10
8
6
4
2
1.7− 1.9− 2.1− 2.3− 2.5− 2.7− 2.9− 3.1− 3.3− 3.5− 3.7− 3.9− 4.1−
1.8 2.0 2.2 2.4 2.6 2.8 3.0 3.2 3.4 3.6 3.8 4.0 4.2
Percent range
Number of participants

2026
20
18
16
14
12
10
8
6
4
2
1.7− 1.9− 2.1− 2.3− 2.5− 2.7− 2.9− 3.1− 3.3− 3.5− 3.7− 3.9− 4.1−
1.8 2.0 2.2 2.4 2.6 2.8 3.0 3.2 3.4 3.6 3.8 4.0 4.2
Percent range
Number of participants

Longer run
20
18
16
14
12
10
8
6
4
2
1.7− 1.9− 2.1− 2.3− 2.5− 2.7− 2.9− 3.1− 3.3− 3.5− 3.7− 3.9− 4.1−
1.8 2.0 2.2 2.4 2.6 2.8 3.0 3.2 3.4 3.6 3.8 4.0 4.2
Percent range

Note: Definitions of variables and other explanations are in the notes to table 1.

Page 7 of 17
 For release at 2:00 p.m., EDT, September 20, 2023

Figure 3.D. Distribution of participants’ projections for core PCE inflation, 2023–26

Number of participants

2023
20
September projections 18
June projections 16
14
12
10
8
6
4
2

1.7− 1.9− 2.1− 2.3− 2.5− 2.7− 2.9− 3.1− 3.3− 3.5− 3.7− 3.9− 4.1− 4.3− 4.5−
1.8 2.0 2.2 2.4 2.6 2.8 3.0 3.2 3.4 3.6 3.8 4.0 4.2 4.4 4.6
Percent range

Number of participants

2024
20
18
16
14
12
10
8
6
4
2

1.7− 1.9− 2.1− 2.3− 2.5− 2.7− 2.9− 3.1− 3.3− 3.5− 3.7− 3.9− 4.1− 4.3− 4.5−
1.8 2.0 2.2 2.4 2.6 2.8 3.0 3.2 3.4 3.6 3.8 4.0 4.2 4.4 4.6
Percent range

Number of participants

2025
20
18
16
14
12
10
8
6
4
2

1.7− 1.9− 2.1− 2.3− 2.5− 2.7− 2.9− 3.1− 3.3− 3.5− 3.7− 3.9− 4.1− 4.3− 4.5−
1.8 2.0 2.2 2.4 2.6 2.8 3.0 3.2 3.4 3.6 3.8 4.0 4.2 4.4 4.6
Percent range

Number of participants

2026
20
18
16
14
12
10
8
6
4
2

1.7− 1.9− 2.1− 2.3− 2.5− 2.7− 2.9− 3.1− 3.3− 3.5− 3.7− 3.9− 4.1− 4.3− 4.5−
1.8 2.0 2.2 2.4 2.6 2.8 3.0 3.2 3.4 3.6 3.8 4.0 4.2 4.4 4.6
Percent range

Note: Definitions of variables and other explanations are in the notes to table 1.

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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, 2023–26 and over the longer run

Number of participants

2023
20
September projections 18
June projections 16
14
12
10
8
6
4
2
2.13− 2.38− 2.63− 2.88− 3.13− 3.38− 3.63− 3.88− 4.13− 4.38− 4.63− 4.88− 5.13− 5.38− 5.63− 5.88− 6.13−
2.37 2.62 2.87 3.12 3.37 3.62 3.87 4.12 4.37 4.62 4.87 5.12 5.37 5.62 5.87 6.12 6.37
Percent range
Number of participants

2024
20
18
16
14
12
10
8
6
4
2
2.13− 2.38− 2.63− 2.88− 3.13− 3.38− 3.63− 3.88− 4.13− 4.38− 4.63− 4.88− 5.13− 5.38− 5.63− 5.88− 6.13−
2.37 2.62 2.87 3.12 3.37 3.62 3.87 4.12 4.37 4.62 4.87 5.12 5.37 5.62 5.87 6.12 6.37
Percent range
Number of participants

2025
20
18
16
14
12
10
8
6
4
2
2.13− 2.38− 2.63− 2.88− 3.13− 3.38− 3.63− 3.88− 4.13− 4.38− 4.63− 4.88− 5.13− 5.38− 5.63− 5.88− 6.13−
2.37 2.62 2.87 3.12 3.37 3.62 3.87 4.12 4.37 4.62 4.87 5.12 5.37 5.62 5.87 6.12 6.37
Percent range
Number of participants

2026
20
18
16
14
12
10
8
6
4
2
2.13− 2.38− 2.63− 2.88− 3.13− 3.38− 3.63− 3.88− 4.13− 4.38− 4.63− 4.88− 5.13− 5.38− 5.63− 5.88− 6.13−
2.37 2.62 2.87 3.12 3.37 3.62 3.87 4.12 4.37 4.62 4.87 5.12 5.37 5.62 5.87 6.12 6.37
Percent range
Number of participants

Longer run
20
18
16
14
12
10
8
6
4
2
2.13− 2.38− 2.63− 2.88− 3.13− 3.38− 3.63− 3.88− 4.13− 4.38− 4.63− 4.88− 5.13− 5.38− 5.63− 5.88− 6.13−
2.37 2.62 2.87 3.12 3.37 3.62 3.87 4.12 4.37 4.62 4.87 5.12 5.37 5.62 5.87 6.12 6.37
Percent range

Note: Definitions of variables and other explanations are in the notes to table 1.

Page 9 of 17
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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 6
Median of projections
70% confidence interval 5

4
Actual 3

−1

−2

−3

2018 2019 2020 2021 2022 2023 2024 2025 2026

FOMC participants’ assessments of uncertainty and risks around their economic projections

Number of participants Number of participants

Uncertainty about GDP growth Risks to GDP growth

September projections September projections
June projections
20 June projections
20
18 18
16 16
14 14
12 12
10 10
8 8
6 6
4 4
2 2

Lower Broadly Higher Weighted to Broadly Weighted to

similar downside balanced 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.”

Page 10 of 17
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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
Median of projections
7
70% confidence interval

5
Actual
4

2018 2019 2020 2021 2022 2023 2024 2025 2026

FOMC participants’ assessments of uncertainty and risks around their economic projections

Number of participants Number of participants

Uncertainty about the unemployment rate Risks to the unemployment rate

September projections September projections
June projections
20 June projections
20
18 18
16 16
14 14
12 12
10 10
8 8
6 6
4 4
2 2

Lower Broadly Higher Weighted to Broadly Weighted to

similar downside balanced 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
7
70% confidence interval

Actual 3

2018 2019 2020 2021 2022 2023 2024 2025 2026

FOMC participants’ assessments of uncertainty and risks around their economic projections

Number of participants Number of participants

Uncertainty about PCE inflation Risks to PCE inflation

September projections September projections
June projections
20 June projections
20
18 18
16 16
14 14
12 12
10 10
8 8
6 6
4 4
2 2

Lower Broadly Higher Weighted to Broadly Weighted to

similar downside balanced upside

Number of participants Number of participants

Uncertainty about core PCE inflation Risks to core PCE inflation

September projections September projections
June projections
20 June projections
20
18 18
16 16
14 14
12 12
10 10
8 8
6 6
4 4
2 2

Lower Broadly Higher Weighted to Broadly Weighted to

similar downside balanced 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.”

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Figure 4.D. Diffusion indexes of participants’ uncertainty assessments

Diffusion index
Change in real GDP
1.00
0.75
0.50
0.25
0.00
−0.25
−0.50
−0.75
−1.00

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Diffusion index
Unemployment rate
1.00
0.75
0.50
0.25
0.00
−0.25
−0.50
−0.75
−1.00

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Diffusion index
PCE inflation
1.00
0.75
0.50
0.25
0.00
−0.25
−0.50
−0.75
−1.00

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Diffusion index
Core PCE inflation
1.00
0.75
0.50
0.25
0.00
−0.25
−0.50
−0.75
−1.00

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Note: For each SEP, participants provided responses to the question “Please indicate your judgment of the
uncertainty attached to your projections relative to the levels of uncertainty over the past 20 years.” Each point
in the diffusion indexes represents the number of participants who responded “Higher” minus the number who
responded “Lower,” divided by the total number of participants. Figure excludes March 2020 when no projections
were submitted.

Page 13 of 17
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Figure 4.E. Diffusion indexes of participants’ risk weightings

Diffusion index
Change in real GDP
1.00
0.75
0.50
0.25
0.00
−0.25
−0.50
−0.75
−1.00

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Diffusion index
Unemployment rate
1.00
0.75
0.50
0.25
0.00
−0.25
−0.50
−0.75
−1.00

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Diffusion index
PCE inflation
1.00
0.75
0.50
0.25
0.00
−0.25
−0.50
−0.75
−1.00

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Diffusion index
Core PCE inflation
1.00
0.75
0.50
0.25
0.00
−0.25
−0.50
−0.75
−1.00

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Note: For each SEP, participants provided responses to the question “Please indicate your judgment of the risk
weighting around your projections.” Each point in the diffusion indexes represents the number of participants who
responded “Weighted to the Upside” minus the number who responded “Weighted to the Downside,” divided by the
total number of participants. Figure excludes March 2020 when no projections were submitted.

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Figure 5. Uncertainty and risks in projections of the federal funds rate

Percent
Federal funds rate
7
Midpoint of target range
Median of projections
70% confidence interval*
6

Actual
3

2018 2019 2020 2021 2022 2023 2024 2025 2026

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.

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Table 2. Average Historical Projection Error Ranges

(Percentage points)

Variable 2023 2024 2025 2026

Change in real GDP1 . . . . . . . . . . . . . . ± 1.3 ± 1.8 ± 2.1 ± 2.3

Unemployment rate1 . . . . . . . . . . . . . . ± 0.5 ± 1.3 ± 1.9 ± 2.1
2
Total consumer prices ............ ± 1.0 ± 1.8 ± 1.8 ± 1.7
Short-term interest rates3 . . . . . . . . . ± 0.5 ± 1.7 ± 2.2 ± 2.7

Note: Error ranges shown are measured as plus or minus the root mean
squared error of projections for 2003 through 2022 that were released in the fall
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.

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Forecast Uncertainty
The economic projections provided by the members of rent assessments of the uncertainty surrounding their projec-
the Board of Governors and the presidents of the Federal tions are summarized in the bottom-left panels of those fig-
Reserve Banks inform discussions of monetary policy among ures. Participants also provide judgments as to whether the
policymakers and can aid public understanding of the basis risks to their projections are weighted to the upside, are
for policy actions. Considerable uncertainty attends these weighted to the downside, or are broadly balanced. That is,
projections, however. The economic and statistical models while the symmetric historical fan charts shown in the top
and relationships used to help produce economic forecasts panels of figures 4.A through 4.C imply that the risks to par-
are necessarily imperfect descriptions of the real world, and ticipants’ projections are balanced, participants may judge that
the future path of the economy can be affected by myriad there is a greater risk that a given variable will be above rather
unforeseen developments and events. Thus, in setting the than below their projections. These judgments are summa-
stance of monetary policy, participants consider not only rized in the lower-right panels of figures 4.A through 4.C.
what appears to be the most likely economic outcome as em- As with real activity and inflation, the outlook for the
bodied in their projections, but also the range of alternative future path of the federal funds rate is subject to considerable
possibilities, the likelihood of their occurring, and the poten- uncertainty. This uncertainty arises primarily because each
tial costs to the economy should they occur. participant’s assessment of the appropriate stance of mone-
Table 2 summarizes the average historical accuracy of a tary policy depends importantly on the evolution of real ac-
range of forecasts, including those reported in past Monetary tivity and inflation over time. If economic conditions evolve
Policy Reports and those prepared by the Federal Reserve in an unexpected manner, then assessments of the appropri-
Board’s staff in advance of meetings of the Federal Open ate setting of the federal funds rate would change from that
Market Committee (FOMC). The projection error ranges point forward. The final line in table 2 shows the error ranges
shown in the table illustrate the considerable uncertainty as- for forecasts of short-term interest rates. They suggest that
sociated with economic forecasts. For example, suppose a the historical confidence intervals associated with projections
participant projects that real gross domestic product (GDP) of the federal funds rate are quite wide. It should be noted,
and total consumer prices will rise steadily at annual rates of, however, that these confidence intervals are not strictly con-
respectively, 3 percent and 2 percent. If the uncertainty at- sistent with the projections for the federal funds rate, as these
tending those projections is similar to that experienced in the projections are not forecasts of the most likely quarterly out-
past and the risks around the projections are broadly bal- comes but rather are projections of participants’ individual as-
anced, the numbers reported in table 2 would imply a prob- sessments of appropriate monetary policy and are on an end-
ability of about 70 percent that actual GDP would expand of-year basis. However, the forecast errors should provide a
within a range of 1.7 to 4.3 percent in the current year, 1.2 to sense of the uncertainty around the future path of the federal
4.8 percent in the second year, 0.9 to 5.1 percent in the third funds rate generated by the uncertainty about the macroeco-
year, and 0.7 to 5.3 percent in the fourth year. The corre- nomic variables as well as additional adjustments to monetary
sponding 70 percent confidence intervals for overall infla- policy that would be appropriate to offset the effects of
tion would be 1.0 to 3.0 percent in the current year, 0.2 to shocks to the economy.
3.8 percent in the second and third years, and 0.3 to 3.7 per- If at some point in the future the confidence interval
cent in the fourth year. Figures 4.A through 4.C illustrate around the federal funds rate were to extend below zero, it
these confidence bounds in “fan charts” that are symmetric would be truncated at zero for purposes of the fan chart
and centered on the medians of FOMC participants’ projec- shown in figure 5; zero is the bottom of the lowest target
tions for GDP growth, the unemployment rate, and infla- range for the federal funds rate that has been adopted by the
tion. However, in some instances, the risks around the pro- Committee in the past. This approach to the construction of
jections may not be symmetric. In particular, the unemploy- the federal funds rate fan chart would be merely a convention;
ment rate cannot be negative; furthermore, the risks around it would not have any implications for possible future policy
a particular projection might be tilted to either the upside or decisions regarding the use of negative interest rates to pro-
the downside, in which case the corresponding fan chart vide additional monetary policy accommodation if doing so
would be asymmetrically positioned around the median pro- were appropriate. In such situations, the Committee could
jection. also employ other tools, including forward guidance and asset
Because current conditions may differ from those that purchases, to provide additional accommodation.
prevailed, on average, over history, participants provide While figures 4.A through 4.C provide information on
judgments as to whether the uncertainty attached to their the uncertainty around the economic projections, figure 1
projections of each economic variable is greater than, smaller provides information on the range of views across FOMC
than, or broadly similar to typical levels of forecast uncer- participants. A comparison of figure 1 with figures 4.A
tainty seen in the past 20 years, as presented in table 2 and through 4.C shows that the dispersion of the projections
reflected in the widths of the confidence intervals shown in across participants is much smaller than the average forecast
the top panels of figures 4.A through 4.C. Participants’ cur- errors over the past 20 years.

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