March 2015 FOMC Forecase: Removal of “Patient” Doesn’t Signal Committee “Impatience”
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399 Park Avenue · 11 th Floor · New York, NY 10022 · 212.326.1000 savills-studley.com Removal of “Patient” Doesn’t Signal Committee “Impatience” March 19, 2015 Yesterday’s announcement from the Federal Open Market Committee (FOMC) affirmed the Committee’s ambivalence regarding the timing of the first rate hike. Importantly, while the phrase, “the Committee judges that it can be patient in beginning to normalize the stance of monetary policy” was removed, yesterday’s statement noted that “the change in forward guidance does not indicate that the Committee has decided on the timing of the initial increase in the target range,” adding that “an increase…remains unlikely at the April FOMC meeting.” In its statement, economic growth was described as having “moderating somewhat”—a distinct change in tone from the January statement where economic activity was characterized as “expanding at a solid pace.” The Board revised its growth, inflation and unemployment rate forecasts lower, and also cut its average forecast for the year-end Fed Funds target by a sizable 35 bps. With a stronger U.S. dollar serving as a form of policy tightening, yesterday’s statement also included a more specific reference to “financial and international developments” by noting weaker export growth—as much a product of slower growth abroad as the dollar’s strength—and likely one factor contributing to the reduction in the target rate for 2015. The bond market cheered the announcement, with yields on the 10-year Treasury note sinking to 1.92%, marking the first time all month that yields ended the day below 2%. And for those who see a June rate hike as a fait accompli? From the Chairwoman’s prepared press conference remarks: “Let me emphasize again that [the] modification of the forward guidance should not be read as indicating that the Committee has decided on the timing of the initial increase in the target range for the federal funds rate. In particular, this change does not mean that an increase will necessarily occur in June, although we can’t rule that out.” Source: Federal Reserve Note: Excludes the three highest and three lowest projections for each variable in each year (except average and median Fed Funds rate figures, which include all participants.) Bolded figures are March 2015 forecasts (versus December 2014). Arrows (↑,↓ and ≈ ) indicate direction of change in forecast from December 2014 to March 2015. Real GDP and inflation projections are from Q4 of the previous year to Q4 of the year indicated. PCE inflation refer s to the price index for personal consumption expenditures. Projections for the unemployment rate are for the average rate during Q4 of the year indicated. RESEARCH CONTACT Heidi Learner, Chief Economist [email protected] 212-326-8648 Variable 2014 2015 2016 2017 Longer Run Change in real GDP n/a 2.3% to 2.7% ↓ 2.3% to 2.7% ↓ 2.0% to 2.4% ↓ 2.0% to 2.3% ≈ Dec 2014 projection 2.3% to 2.4% 2.6% to 3.0% 2.5% to 3.0% 2.3% to 2.5% 2.0% to 2.3% Unemployment rate n/a 5.0% to 5.2% ↓ 4.9% to 5.1% ↓ 4.8% to 5.1% ↓ 5.0% to 5.2% ↓ Dec 2014 projection 5.8% 5.2% to 5.3% 5.0% to 5.2% 4.9% to 5.3% 5.2% to 5.5% PCE inflation n/a 0.6% to 0.8% ↓ 1.7% to 1.9% ≈ ↓ 1.9% to 2.0% ≈ ↓ 2.0% ≈ Dec 2014 projection 1.2% to 1.3% 1.0% to 1.6% 1.7% to 2.0% 1.8% to 2.0% 2.0% Core PCE inflation n/a 1.3% to 1.4% ↓ 1.5% to 1.9% ≈ 1.8% to 2.0% ≈ n/a Dec 2014 projection 1.5% to 1.6% 1.5% to 1.8% 1.7% to 2.0% 1.8% to 2.0% n/a Fed Funds (average) n/a 0.772% ↓ 2.02% ↓ 3.18% ↓ 3.66% ↓ Dec 2014 projection 0.125% 1.125% 2.54% 3.50% 3.78% Fed Funds (median) n/a 0.625% ↓ 1.88% ↓ 3.125% ↓ 3.75% ≈ Dec 2014 projection 0.125% 1.125% 2.50% 3.625% 3.75% Federal Open Market Committee National Table 1. Economic Projections of Federal Reserve Board Members and Presidents, March 2015 Savills Studley is the leading commercial real estate services firm specializing in tenant representation. Founded in 1954, the firm pioneered the conflict- free business model of representing only tenants in their commercial real estate transactions. Today, supported by high quality market research and in- depth analysis, Savills Studley provides strategic real estate solutions to organizations across all industries. The firm's comprehensive commercial real estate platform includes brokerage, project management, capital markets, consulting and corporate services. With 26 offices in the U.S. and a heritage of innovation, Savills Studley is well known for tenacious client advocacy and exceptional service. The firm is part of London-headquartered Savills plc, the premier global real estate service provider with over 27,000 professionals and over 600 locations around the world.
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Transcript of March 2015 FOMC Forecase: Removal of “Patient” Doesn’t Signal Committee “Impatience”
399 Park Avenue · 11th
Floor · New York, NY 10022 · 212.326.1000
savills-studley.com
Removal of “Patient” Doesn’t Signal Committee “Impatience” March 19, 2015
Yesterday’s announcement from the Federal Open Market Committee (FOMC) affirmed the Committee’s ambivalence
regarding the timing of the first rate hike. Importantly, while the phrase, “the Committee judges that it can be patient in
beginning to normalize the stance of monetary policy” was removed, yesterday’s statement noted that “the change in
forward guidance does not indicate that the Committee has decided on the timing of the initial increase in the target
range,” adding that “an increase…remains unlikely at the April FOMC meeting.”
In its statement, economic growth was described as having “moderating somewhat”—a distinct change in tone from the
January statement where economic activity was characterized as “expanding at a solid pace.” The Board revised its
growth, inflation and unemployment rate forecasts lower, and also cut its average forecast for the year-end Fed Funds
target by a sizable 35 bps. With a stronger U.S. dollar serving as a form of policy tightening, yesterday’s statement also
included a more specific reference to “financial and international developments” by noting weaker export growth—as
much a product of slower growth abroad as the dollar’s strength—and likely one factor contributing to the reduction in
the target rate for 2015.
The bond market cheered the announcement, with yields on the 10-year Treasury note sinking to 1.92%, marking the
first time all month that yields ended the day below 2%. And for those who see a June rate hike as a fait accompli?
From the Chairwoman’s prepared press conference remarks: “Let me emphasize again that [the] modification of the
forward guidance should not be read as indicating that the Committee has decided on the timing of the initial increase in
the target range for the federal funds rate. In particular, this change does not mean that an increase will necessarily
occur in June, although we can’t rule that out.”
Source: Federal Reserve
Note: Excludes the three highest and three lowest projections for each variable in each year (except average and median Fed Funds rate figures, which include all participants.) Bolded figures are March 2015 forecasts (versus December 2014). Arrows (↑,↓ and ≈ ) indicate direction of change in forecast from December 2014 to March 2015.
Real GDP and inflation projections are from Q4 of the previous year to Q4 of the year indicated. PCE inflation refers to the price index for personal consumption expenditures. Projections for the unemployment rate are for the average rate during Q4 of the year indicated.
RESEARCH CONTACT Heidi Learner, Chief Economist [email protected] 212-326-8648
Variable 2014 2015 2016 2017 Longer Run
Change in real GDP n/a 2.3% to 2.7% ↓ 2.3% to 2.7% ↓ 2.0% to 2.4% ↓ 2.0% to 2.3% ≈ Dec 2014 projection 2.3% to 2.4% 2.6% to 3.0% 2.5% to 3.0% 2.3% to 2.5% 2.0% to 2.3%
Unemployment rate n/a 5.0% to 5.2% ↓ 4.9% to 5.1% ↓ 4.8% to 5.1% ↓ 5.0% to 5.2% ↓
Dec 2014 projection 5.8% 5.2% to 5.3% 5.0% to 5.2% 4.9% to 5.3% 5.2% to 5.5%
PCE inflation n/a 0.6% to 0.8% ↓ 1.7% to 1.9% ≈ ↓ 1.9% to 2.0% ≈ ↓ 2.0% ≈ Dec 2014 projection 1.2% to 1.3% 1.0% to 1.6% 1.7% to 2.0% 1.8% to 2.0% 2.0%
Core PCE inflation n/a 1.3% to 1.4% ↓ 1.5% to 1.9% ≈ 1.8% to 2.0% ≈ n/a Dec 2014 projection 1.5% to 1.6% 1.5% to 1.8% 1.7% to 2.0% 1.8% to 2.0% n/a
Fed Funds (average) n/a 0.772% ↓ 2.02% ↓ 3.18% ↓ 3.66% ↓ Dec 2014 projection 0.125% 1.125% 2.54% 3.50% 3.78%
Fed Funds (median) n/a 0.625% ↓ 1.88% ↓ 3.125% ↓ 3.75% ≈ Dec 2014 projection 0.125% 1.125% 2.50% 3.625% 3.75%
Federal Open
Market Committee
National
Table 1. Economic Projections of Federal Reserve Board Members and Presidents, March 2015
Savills Studley is the leading commercial real estate services firm specializing in tenant representation. Founded in 1954, the firm pioneered the conflict-free business model of representing only tenants in their commercial real estate transactions. Today, supported by high quality market research and in-depth analysis, Savills Studley provides strategic real estate solutions to organizations across all industries. The firm's comprehensive commercial real estate platform includes brokerage, project management, capital markets, consulting and corporate services. With 26 offices in the U.S. and a heritage of innovation, Savills Studley is well known for tenacious client advocacy and exceptional service. The firm is part of London-headquartered Savills plc, the premier global real estate service provider with over 27,000 professionals and over 600 locations around the world.
