In these projections, the Fed painted a pretty gloomy picture: ultra-low growth, rising unemployment, and what would be a stifling increase in interest rates into the end of the year.
As we discussed yesterday, if they were to follow through on this outlook, they would bury the economy into a deep recession.
But keep in mind, these projections are part of the Fed's "forward guidance" strategy.
And "forward guidance" is an explicit tool, at the Fed's disposal (just like interest rate setting), intended to manipulate behaviors.
What behavior do they want to manipulate? Hiring. Spending. Investing. Confidence. Mostly, they want all of this to manipulate the "expectations" of where inflation is going.
Remember, the Fed is far more concerned about inflation expectations, than they are about inflation. If they lose control of expectations, people start pulling forward purchases, in anticipation of higher prices, creating a self-fulfilling upward spiral in prices.
On that note, they are winning. This next chart is their favored gauge on measuring inflation expectations.