Fed Officials Dial Back 2023 Growth Forecast: Will US Economy Stay Chilly?

Federal Reserve officials are expecting a decline in economic activity through the rest of the year as implied by new economic projections published this week. Data shows authorities now anticipate the U.S. to witness a 0.4% expansion this year, down from the 0.5% growth rate they forecast in December. Bloomberg first published the story.

It does not seem like a big downgrade at first look but it's important to consider that number in the wake of the economy's strength seen in the first quarter so far, indicated Robin Brooks, chief economist at the International Institute of Finance in Washington, according to a Bloomberg report. "The Fed is bracing for recession," Brooks stated.

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Revisions: The unemployment rate has been revised downwards to 4.5% from 4.6% earlier while the Personal Consumption Expenditures inflation forecast for the year has been revised upwards to 3.3% from 3.1% estimated in December.

The PCE Price Index reflects changes in the prices of goods and services purchased by consumers in the United States. The central bank watches the PCE inflation very closely.

The core PCE inflation forecast now stands at 3.6% against the 3.5% forecast earlier. The Federal Funds rate projection for 2023 has been maintained in line with the previous forecast of 5.1%.

Considerable uncertainty attends these projections, the summary noted. The economic and statistical models and relationships used to help produce economic forecasts are necessarily imperfect descriptions of the real world, the summary stated adding that the future path of the economy can be affected by myriad unforeseen developments and events.

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