Fed Releases FOMC Minutes From June 22-23 Meeting

Members of the Federal Open Market Committee have made modest downward revisions to their projections for real GDP growth in 2010, the minutes of the two-day June meeting revealed on Wednesday.

FOMC: “Participants’ projections for real GDP growth in 2010 had a central tendency of 3.0 to 3.5 percent, [slightly lower than April’s 3.2% to 3.7% forecast]. Participants noted that the economic recovery was proceeding. Consumer spending was increasing, supported by rising disposable income as labor markets gradually improved….

Participants noted that financial conditions “had tightened somewhat because of developments abroad. The effects of a stronger dollar, a lower stock market, and wider corporate credit spreads were expected to be offset only partially by lower oil and commodity prices and a decline in Treasury yields.”

Additionally, the Fed said that the committee members anticipated that the economic expansion would be held back by “firms’ caution in hiring and spending in light of the considerable uncertainty regarding the economic outlook, by households’ focus on repairing balance sheets weakened by equity and house price declines, and by tight credit conditions for small businesses and households.”

Looking further ahead, the central tendencies of participants’ projections for real GDP growth were 3.5 to 4.2 percent in 2011 and 3.5 to 4.5 percent in 2012.

With regard to inflation, the FOMC participants’ forecasts for inflation suggested that they expected  inflation to remain subdued 1.0% to 1.1% and a bit lower than in the projections, 1.2% to 1.5%, they made in conjunction with the April 2010 FOMC meeting.

Meanwhile, the outlook for the unemployment rate in the fourth quarter of 2010 was 9.2 to 9.5 percent.

“Consistent with their expectations of a gradual economic recovery, participants generally anticipated that the unemployment rate would decline to 7.1 to 7.5 percent by the end of 2012.”

[emphasis added]

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