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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
FED
December's FOMC macroeconomic projections arguably play a slightly more important role than usual, as the downgrade in the projected Fed funds rate path will be predicated upon the downward revision in inflation forecasts. This approach paves the way for nominal rate cuts starting next year without reducing "real" restrictiveness. The "spread" between the Fed funds rate median in the Dot Plot and the forecast inflation rate will be a key focus, we expect. (Link to September SEP)
- Inflation: September’s projections marked the first time the SEP lowered a core PCE forecast for the current year since 2020 – it now looks set to be lowered again, with the FOMC having set what looked like at the time (and especially now in retrospect) as too high a core forecast for this year at 3.7%.
- MNI expects the headline PCE forecast to be lowered 0.2pp to 3.1% for 2023, with a 0.1-0.2pp reduction in the 2024 projection.
- Core should come down 0.2-0.3pp for 2023 to 3.4-3.5%, with 2024 lowered 0.1-0.2pp to 2.4-2.5%. Again here the distributions could be interesting, with no FOMC participants in September having projected inflation to hit target by end-2024, and just 3 seeing core PCE below 2.5% (with 8 seeing 2.7% or higher).
- BBG Economist Forecast Consensus for Headline PCE: 3.1% 2023, 2.3% 2024
- BBG Economist Forecast Consensus for Core PCE: 3.5% 2023, 2.5% 2024
- Growth and Unemployment: A very strong Q3 GDP figure meant September projections easily undershot on Q4/Q4 2023 growth, so will be revised up substantially (0.4pp to 2.5%). The current GDP estimate for 2024 of 1.5% is far above the 0.7% analyst consensus and probably will be revised lower on base effects if nothing else. We would expect the unemployment rate forecasts to remain fairly static - 2023 unch at 3.8%, 2024 to 4.2% from 4.1% - the latter remaining below the market consensus for 2024.
- BBG Economist Forecast Consensus for Real GDP Growth: 2.5% 2023, 0.7% 2024
- BBG Economist Forecast Consensus for Unemployment: 3.9% 2023, 4.4% 2024
Source: MNI, Federal Reserve September Projections
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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