FOMC’s Goldilocks projections overlook impending fiscal drag, especially from student-loan repayments
We expect US real GDP to grow above 4% QoQsaar in Q3CY23, inducing a further 25bp hike in the Fed Funds rate at the FOMC’s meeting on 1st Nov’23. At this week’s meeting, the FOMC’s median projections suggested a Goldilocks economy in CY23, with real GDP growing 2.1% (vs the projection of 1% in Jun’23) while core PCE inflation was projected to end CY23 at 3.7% (vs 3.9% previously).