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Data available at the time of the October FOMC meeting indicated that economic growth had been solid during the second and third quarters, and evidence that the contraction in the housing sector had begun to spill over substantially to other sectors of the economy re-mained scant.
Consequently, despite the recent financial market turmoil, the central tendency of participants' projections for real GDP growth in 2007, at 2.4-2.5%, was little changed from the central tendency of the projections provided in conjunction with the June FOMC meeting and included in the Board's Monetary Policy Report to the Congress in July.
However, the central tendency of participants' projections for real GDP growth in 2008 was revised down to 1.8-2.5%, notably below the 2.25-2.75% central tendency in June.
These revisions to the 2008 outlook since June stemmed from a number of factors, including the tightened terms and reduced availability of sub-prime and jumbo mortgages, weaker-than-expected housing data, and rising oil prices.
Economic activity was projected to expand at a pace broadly in line with participants' estimates of the rate of expansion of the economy's productive potential in 2009 and to continue at much the same pace in 2010.
Most participants expected that, with output growth running somewhat below trend over the next year or so, the unemployment rate would increase modestly.
The central tendency of participants' projections for e average rate of unemployment in the fourth quarter of 2008 was 4.8-4.9%, slightly above the 4.75% unemployment rate forecasted in June; these projections suggested the emergence of a little slack in labor markets. The central tendency of core inflation projections for 2008 was 1.7-1.9%.
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