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Ernie Tedeschi reports that there is no change to the FOMC's short-run rate projections. However, he highlights that the median FOMC participant now sees long-run growth at 2 percent, an increase from 1.8 percent in December. Additionally, the long-run neutral rate (R star) is projected at 1.1 percent, up from 1 percent.
These changes indicate a shift in the long-term economic outlook among FOMC participants.
The upward revision in the FOMC’s growth and neutral rate projections aligns with recent trends in productivity gains, as seen in the 2.8 percent rise in nonfarm business productivity in 2025 highlighted by Ernie Tedeschi. These macroeconomic adjustments also intersect with broader demographic challenges, including the impact of lower birthrate trends on the trajectory of GDP growth.