Fed publishes longer-term economic projections

On Wednesday Federal Reserve began publishing officials’ longer-term projections for five or six years from now for inflation, economic growth and unemployment to anchor public expectations for prices, as an addition to the current three-year forecasts, are to appear beginning with minutes of the January, 27-28 Federal Open Market Committee meeting. 

Fed governors and district-bank presidents are trying to contain the risk of deflation, which would worsen the financial crisis and deepen the recession. The change brings the Fed closer to a formal inflation goal, something those central banks in the euro region, the U.K. and the other countries that are required to observe in designing interest rate policies.

Chairman Ben S. Bernanke said in the speech that inflation is expected to be quite low for some time, without mentioning the word deflation. He also considers that the change should provide the public a clearer picture of FOMC participants’ policy strategy for promoting maximum employment and price stability over time, and that the move also should help to better stabilize the public’s inflation expectations, thus contributing to keeping actual inflation from rising too high or falling too low. 

 The Fed minutes and forecasts indicated that officials are aiming to move public expectations at a 2 percent rate. Policy makers estimated long-term economic growth at 2.5 percent to 2.7 percent and an unemployment rate at 4.8 percent to 5 percent.