In the new economic projections, Fed projected a much shallower contraction in 2020 but revised down 2021 and 2022 growth. Unemployment rate forecasts were also revised lower through the horizon. Core PCE inflation projections were revised up but would stay below Fed’s 2% target through 2022. Logically, with or even without the new average inflation targeting, federal funds rate are expected to stay at current level through 2022.

Here are the median forecasts:

GDP:

• 2020 contraction revised up to -3.7% (from June’s -6.5%).
• 2021 growth at 4.0% (down from 5.0%).
• 2020 growth at 3.0% (down from 3.5%).

Unemployment rate:

• 2020 at 7.6% (revised down from 9.3).
• 2021 at 5.5% (down from 6.5%).
• 2022 at 4.6% (down from 5.5%).

Core PCE inflation:

• 2020 at 1.5% (revised up from 1.0%).
• 2021 at 1.7% (up form 1.5%).
• 2022 at 1.9% (up from 1.7%).

FOMC kept federal funds rate unchanged at 0-0.25% as widely expected. Additionally, Fed will continue with asset purchases “at least at the current pace”. Also, the committee would be “prepared to adjust the stance of monetary policy as appropriate”.

In line with the new “average inflation targeting”, Fed said: “With inflation running persistently below this longer-run goal, the Committee will aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer-term inflation expectations remain well anchored at 2 percent.”

Dallas Fed President Robert Kaplan dissented, preferring to retain “greater policy rate flexibility”. Minneapolis Fed President Neel Kashkari dissented in favor of waiting for a rate hike until “core inflation has reached 2% on a sustained basis.”

Full statement here.