Not One of the Fed's 18 Officials Sees Downside Risk to Growth

Not One of the Fed's 18 Officials Sees Downside Risk to Growth

In the Summary of Economic Projections released on 16 September, the number of Federal Reserve officials who judged risks to GDP growth as weighted to the downside was zero.

The series, compiled by Apollo, starts in 2011 and has never printed zero before. The count reached almost 18, effectively the entire committee, in late 2024. It sat near 17 in mid-2022 and between 13 and 14 during 2019 and 2020. The minutes of July's meeting still described risks to both employment and real growth as skewed to the downside. Two months later the count is nil.

Zero is not optimism. In the same projections, 15 of the 18 participants saw risks to core inflation weighted to the upside, and the committee raised its growth forecasts for 2026 and 2027 by a tenth of a point each, to 2.3% and 2.4%. A risk assessment does not say whether things will go well. It says which direction the forecast is more likely to be wrong in. This September the answer is inflation running hotter, not growth coming in weaker.

That shift explains what has been happening in rate markets. Once a central bank's worries sit entirely on the inflation side, the bar for easing rises and the bar for tightening falls.

None of this should be read as certainty. The same document estimates that even with balanced risks, there is roughly a 70% chance actual growth this year lands somewhere between 1.6% and 4.4%. The officials are saying the uncertainty no longer leans one way, not that it has gone.

Source: the Federal Reserve Summary of Economic Projections, J.P. Morgan Asset Management and the Conference Board (Image: @Barchart)