Confusion surrounding an inadvertent release of staff forecasts by the Federal Reserve deepened on Friday evening after the central bank said that some of the numbers accidentally put on its website last month were wrong.
The central bank said earlier that it had accidentally released confidential staff projections that were used in the Federal Open Market Committee’s meeting on June 16-17.
The data were posted by a staffer on the website on June 29, some time after Fed chair Janet Yellen’s press conference presenting the FOMC policymakers’ own economic outlooks and rate forecasts. The error was only discovered recently.
Tonight, however, the Fed had to correct part of the forecasts that were on the site, saying only some of them were the numbers that were actually presented to the Federal Open Market Committee last month.
Several of the growth and inflation projections were inaccurate, although projections for the Fed funds rate were the actual ones presented to policymakers at the meeting, the Fed said.
The release is a serious embarrassment to the Fed, which is already facing investigations into a leak of information in 2012. Normally Fed staff forecasts are not revealed until five years after the relevant meeting.
The mishap had already left the central bank open to a fresh round of criticism from Congress, with Jeb Hensarling, the Republican chair of the House Financial Services Committee, saying earlier the “recurring leaks” from the central bank pointed to an urgent need for accountability reforms.
The staff forecasts are a critical input into the Fed’s debate over what to do with monetary policy, although they are secondary to the FOMC members’ own views. They come amid fevered speculation over when the central bank will first lift short-term interest rates, with many analysts predicting the first move will come in September.
The FOMC will meet next week, when the committee is expected to leave rates unchanged, leaving the focus on how its language describing the economy evolves from its last statement. The earliest likely date for a rise from the current near-zero levels is in September, with the median FOMC forecast signalling another move around December.
The staff projections imply relatively sluggish growth even under a shallower path of rate hikes than envisaged by the FOMC members themselves.
The staff envisage the Fed funds rate averaging 0.35 per cent in the fourth quarter this year, rising to 1.26 per cent the same time in 2016 and 2.12 per cent in 2017. That is a lower path of hikes than the median projection by the FOMC, where the rate is seen at 1.625 per cent by the end of 2016 and 2.875 per cent at the end of 2017.
Under those conditions growth would be lacklustre. The now-corrected staff figures suggested that the economy would grow just 1.6 per cent this year, before accelerating to 2.4 per cent in 2016 and 2.2 per cent in 2017, then, sinking back below 2 per cent from 2018 onwards.
Inflation remains below the Fed’s two per cent target until 2020 — although the corrected figures showed it is only a marginal miss. And despite growth running above the economy’s potential rate of around 1.7 per cent in 2016 and 2017, the unemployment rate bottoms out at around 5.2 per cent, only a little below its current 5.3 per cent rate.
That sticky unemployment rate suggests that Fed staff believe there are still a large number of workers sitting on the sidelines who could return to the jobs market and swell the labour force, raising the participation rate.
Janet Yellen, the Fed chair, told congress earlier this month that she still saw some “slack” in the labour market.
The Fed said in a statement that the release of information had been referred to the Board’s Inspector General. “The projections that were inadvertently released are staff projections that do not incorporate policymakers’ views, including their views on monetary policy,” it said.