Central Tendencies for December 2020
key highlights from the central tendencies:
- GDP revised higher in 2021 and 2022. In 2021, the projections in September were for 3.6%-4.7%. The expectations are now for 3.7%-5%. In 2022, the expectations were for 2.5%-3.3%. That is now higher to 3.0%-3.5%.
- Unemployment rate was revised lower in both 2021 and 2022. The expectations for unemployment rate was revised lower to 4.7%-5.4% from 5.0%-6.2% in 2021. In 2022, the rate was lowered to 3.8%-4.6% from 4.0%-5.0%.
- Headline PCE inflation was revised marginally higher in both 2021 and 2022. In 2021, the PCE rate was revised up to 1.7%-1.8% from 1.6%-1.9% in 2021. In 2022, the rate was revised to 1.8%-2.0% from 1.7%-1.9%.
- The expected federal funds rate remained unchanged.
The combination suggest the Fed will allow the economy to run hot to allow inflation to move back toward the 2% target having said that, the expectations for inflation is expected to remain below 2.1% at its peak for the headline and core inflation going out 2 2021
The dot plot looks a lot like the dot plot from September.
Below is the December dot plot:
The September dot plot:
