Given the modal outlook envisioned in FOMC participants’ recent forecasts, with headwinds continuing to diminish, the equilibrium real rate rising, and inflation moving back up to 2 percent over the next few years, the risk that the funds rate would need to return to near zero should be declining appreciably.
Consistent with this assessment, almost all FOMC participants now view the risks to the outlook for real activity as largely balanced, although some also see inflation risks as weighted to the downside. That said, it is sobering to note that many market participants appear to assess the risks to the outlook quite differently.