The Outlook for Inflation

In the December SEP, the median of projections for headline PCE price inflation in 2016 was 1.5 percent, a bit higher than in September. The median of projections for headline PCE price inflation was 1.9 percent in 2017 and 2.0 percent in 2018 and 2019, unchanged from September. Several participants projected that inflation will slightly exceed the Committee’s objective in 2018 or 2019. The medians of projections for core PCE price inflation were the same as in September, rising from 1.7 percent in 2016 to 1.8 percent in 2017 and 2.0 percent in 2018 and 2019.

Figures 3.C provide information on the distribution of participants’ views about the outlook for inflation. The distributions of projections for headline and core PCE price inflation shifted up slightly relative to projections for the September meeting. Some participants attributed the upward shift in projected inflation this year and next to recent data that showed somewhat higher inflation than they had expected. A few saw higher inflation in 2019 in conjunction with somewhat greater undershooting of the unemployment rate below its longer-run normal level.

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