Every quarter, FOMC meeting participants submit their projections of key economic indicators. The committee releases the Summary of Economic Projections (SEP), containing the median, central tendency, and range of these projections:
- civilian unemployment rate
- headline and core PCEPI
- real GDP growth
- and the federal funds rate.
Projections are generally provided for the current year, the next two years, and the “longer run.” In this blog post, we use ALFRED to look at several recent projections for the unemployment rate, core PCEPI inflation, and the federal funds rate through 2027. At the press conference after the March FOMC meeting, Chair Powell noted that these forecasts are always subject to uncertainty, which is unusually elevated now, and the projections are not a committee plan or decision.
Our first ALFRED graph, above, shows the unemployment rate projections for the fourth quarters of 2025, 2026, and 2027 according to the SEPs released in March 2025, December 2024, and September 2024. Most recently, as shown by the red bar, the median FOMC participant projects that the unemployment rate will average 4.4% in Q4 2025 and drop to 4.3% over 2026 and 2027.
How does this stack up against previous projections for the same period? The projected unemployment rate for 2025 is slightly higher now than it was in December of last year (green bar), but is the same as it was in September of last year (blue bar).
At the press conference, Chair Powell noted that labor market conditions remain solid and that a wide set of indicators suggest that the labor market is broadly in balance.
Our second graph, above, shows the core inflation rate projections for the same years and is more interesting. While the median FOMC participant still expects inflation to return to target by 2027, projections of the inflation rate have been revised upward for 2025. In September, the median participant had projected core inflation to measure only 2.2% by the end of this year. However, over the past 6 months, that projection has shifted up by 0.6 percentage points to 2.8%.
At the press conference, Chair Powell noted that some near-term measures of inflation expectations have recently moved up; however, most measures of longer-term inflation expectations remain consistent with the goal of 2% inflation.
Our final graph shows the median participant’s projections of the federal funds rate. The most recent projections are slightly higher than they were in September 2024 for each year from 2025 through 2027. The 2025 and 2026 projections are now 50 basis points higher than they were in September, and the 2027 projection is now 25 basis points higher.
How these graphs were created: Search ALFRED for “FOMC unemployment” and take the median projection. Click on “Edit Graph,” choose a bar graph, and add two bars with the same series again. Finally, select the proper vintage for each bar. For the other two graphs, proceed similarly with “FOMC Consumption” and “FOMC Fed Funds Rate.”
Suggested by Charles Gascon and Joseph Martorana.
