The economy looks significantly worse now than it did three months ago.
Federal Reserve officials downgraded their expectations for the economy, lowering their forecasts for growth and raising forecasts for unemployment and inflation, according to materials released Wednesday at the conclusion of the Fed’s two-day monetary policy meeting.
The new projections show the median expectation is for the economy to grow at an inflation-adjusted 5.9 percent this year, down from an expectation for seven percent growth at the June meeting.
Consistent with the view of slower growth, Fed officials also see unemployment higher than they did earlier this summer. The median forecast for the unemployment rate at the end of the year is 4.8 percent, compared with 4.5 percent in June.
Less growth and higher unemployment, however, are not expected to bring down inflation. Quite the opposite. The median forecast for inflation this year rose to 4.2 percent from 3.4 percent. Core inflation, which excludes food and fuel prices, is now expected to come in at 3.7 percent, up from three percent.
Both core and headline inflation are expected to be slightly higher next year, as well, and then to settle in at 2.1 percent in 2024.
GDP growth for 2023 was revised higher, indicating that Fed officials think supply chain disruptions will push growth off into the future rather than create a permanent drag. The expectations for unemployment beyond next year were unchanged.