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The Federal Reserve...I Slipped, I Stumbled, I Fell

The Federal Reserve...I Slipped, I Stumbled, I Fell

February 06, 2023

As an entrepreneur and small business owner, you must have a vision and plan for the future. At most companies, and Impel Wealth Management is no exception, this means putting together goals, projections, and forecasts of where you believe you are heading in the future. 

The Federal Reserve Bank meets eight times each year. At four of their meetings, they give us their updated projections for where they see the economy going. The 12 Federal Open Market Committee members each give their forecast for a number of economic indicators, and these are put together into something commonly known as the dot plot. The graph plots all 12 forecasts and creates a median expectation for things such as GDP, inflation, and Fed actions, an example from the December 2021 meeting is below.


I am happy to report that Impel Wealth generally comes within 5%+/- of our annual budget goal. We also fully accomplish or make substantial progress on most of our goals each year. 

In today’s post, we will look at what the Federal Reserve’s committee members’ December 2021 projections for the US economy for 2022 to help assess the performance of the more than 400 Ph.D. economists that work there, and whose salaries we pay for through our taxes.

Based on what I am about to share with you, the only appropriate background music I could find was an obscure Elvis Presley song recorded in November 1960 for the movie Wild in the Country titled I slipped, I stumbled, I fell. For those of you who do not remember this short but fun ditty, below is a YouTube clip of the song.



According to an article published on December 15th by, the Fed projections assumed that the central bank would raise interest rates three times in 2022. They assumed that this would raise interest rates by approximately 1%. Looking back, we know that the Fed actually raised interest rates seven times by a total of 4.25%. Clearly, the Fed was way off target in this projection…I slipped.

Secondly, the Fed projected that GDP would grow by 4% in 2022. They actually raised their projection from the previous quarter. We know that for the calendar year 2022 GDP, based on initial fourth-quarter projections, grew by 2.1%, approximately 1/2 of the Fed’s forecasted rate. We also know based on numerous anecdotal data points; growth is trending downward…I stumbled.

Finally, the Fed projected inflation, based on its preferred measurement tool of PCE to clock in at 2.6% for the most recent calendar year. This number was released last week and came in at 5.0%, again nearly double what the fed and its bevy of PhDs projected…I fell.

DoubleLine Capital’s CEO and Chief Investment Officer Jeffrey Gundlach is a scary smart economist and market strategist. He has pointed out that there is an extremely high correlation between the movement of the two-year treasury bill, interest rate, and what the Fed does with short-term monetary policy. You can see this tracked for the last 25 years on the chart below.


Based on this, he recently surmised that the federal government could save more than $30 million a year in salaries by firing the Fed’s 400 PhDs, and simply letting the fed funds rate track the two-year T-bill. I doubt that the federal government will take this tact, but it is an interesting idea and thought. 

If Impel Wealth, or corporate America, had the kind of track record the Fed does in forecasting and running our businesses, there would be no Impel Wealth Management. Thankfully, most American businesses are accountable to their shareholders and their clients, who can vote with their feet and their pocketbooks to punish mismanaged businesses.

I slipped, I stumbled, I fell may be a fun song from an unremarkable and unmemorable Elvis movie, but it is no way to forecast your business. The world is watching and waiting to see what the Fed will do in the coming months. The Fed is trying to regain credibility and control of the narrative that it let slip away over the last two years, first by telling us inflation was transitory in 2021, and then undershooting its projections in 2022, as outlined above.  

As inflation drops and the economy slows, we wanted you to have this information and context to help put things in perspective. Part of our mission is to educate you so that we can make wise financial decisions and continue to keep life “Moving Life Forward”.

© 2023 Jesse Hurst

The views stated are not necessarily the opinion of Cetera and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein.  Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed.  Past performance does not guarantee future results.