As shown below, inflation is still expected to come down significantly in 2023, but from 5.2% this year (instead of 4.3% in March's SEP) to 2.6% next year (instead of 2.7% in March's SEP). It expects real GDP growth to be 1.7% this year and next year, down from 2.8% and 2.2%, respectively, in the March SEP. As shown below, the Fed now expects the unemployment rate to increase from 3.7% at the end of this year, to 4.1% in 2024. We continue to believe a recession is more likely than a soft landing. The Fed's projections still suggest a soft landing, but a much bumpier one.
The summary of economic projections (SEP) were released, as they are at every March, June, September, and December FOMC meeting. There were a few significant adjustments to the accompanying FOMC statement, including a new sentence that says the Federal Reserve (Fed) is "strongly committed to returning inflation to its 2% objective " while simultaneously eliminating the prior language about expecting "inflation to return to its 2% objective and the labor market to remain strong." Although the opening line in the statement noted that "economic activity appears to have picked up after edging down in the first quarter," it's worth noting that just today, the Atlanta Fed's GDPNow forecast for second quarter real gross domestic product (GDP) fell from an anemic 0.9% to no-growth-now-expected (0.0%).
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