The Fed’s current projections are more realistic than those made in September but continue to reflect a degree of wishful thinking.
Unemployment Rate & Real GDP. It is difficult for me to believe that Real GDP Growth will be flat in 2023 at 0.5% as the Unemployment Rate increases from 3.7% to 4.6% over the same period (see the Fed’s median projections and more HERE).
One would expect Real GDP to decline as the Unemployment Rate increases, especially given the fact that the consumer has taken on more debt as savings dwindle.
Further, I believe that the Unemployment Rate will peak at a level that is higher than the Fed’s forecast of 4.6% for 2023 and 2024 (see Fed projections, link above).
Unemployment Rate & Inflation. The Unemployment Rate will have to increase more than what the Fed estimates for 2023 (4.6% at the median), in order for inflation as measured by PCE and Core PCE to come down as the Fed estimates in 2023 (3.1% and 3.5% respectively).
Either the Fed’s Unemployment Rate estimate is too low or its inflation estimates (PCE, Core PCE), are too low.