Happy Wednesday! This week covers one of my favorite topics…

IN ACTION

“It remains to be seen how these developments might affect future spending and investment. In our Summary of Economic Projections, the median participant projects GDP to rise 1.7 percent this year, somewhat lower than projected in December, and to rise a bit below 2 percent over the next two years.” - Transcript of Chair Powell’s Press Conference (March 19, 2025)

THE BASICS

The Summary of Economic Projections (“SEP”) is one of the most closely watched economic reports in the world. Introduced in 2007, the report provides a unique view into the Federal Reserve’s decision-making process. Released quarterly, the Summary of Economic Projections allows the Federal Reserve’s top policymakers to share their forecasts for key economic indicators and the future path of interest rates - offering insight into the central bank’s economic outlook and policy direction.

WHY IT MATTERS

The Summary of Economic Projections is prepared based on the individual projections of all 12 regional Federal Reserve Bank presidents and the 7 members of the Federal Reserve Board of Governors. Each participant provides short and long-term forecasts of key economic indicators (things like real GDP, the unemployment rate, inflation) and their assessment of uncertainty and risks (indicating confidence in projections versus prior SEPs). Participants also forecast the federal funds rate, presented in the SEP as dots on a graph – widely known as the “dot plot”. This graph is one of the most highly anticipated components of the SEP as it gives the public a real-time view of the Federal Reserve’s expectation of future interest rates.

It’s important to understand that only members of the Federal Open Market Committee (“FOMC”) submit projections. While forecasts contained in the report are non-binding, the SEP signals where the central bank’s top policymakers, those who will vote on where to set interest rates at upcoming FOMC meetings, believe the economy is heading and how monetary policy should react. The SEP also aligns with the Fed’s goal of greater transparency. By releasing the SEP each quarter, the Fed builds credibility and trust.

2025 AND BEYOND

The latest Summary of Economic Projections was released on March 19th. The median forecast for the target level of the federal funds rate fell below 4% in 2025, signaling that FOMC members anticipated several rate cuts throughout the year. However, economic uncertainty has profoundly increased since the last report. Investors and economists will be closely watching how participants in the June SEP respond.

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