Fed Officials Lower Fed Funds Rate Forecast to 1.125% End-2015

Federal Reserve officials see the federal funds rate rising less by the end of 2015 than they projected three months ago, according to the median estimate of new forecasts released today. They also forecast the economy will be at full employment by the end of next year.

The benchmark rate will be 1.125 percent at the end of next year, compared with a 1.375 percent median estimate in September, quarterly estimates from U.S. central bankers showed today in Washington. The rate will be 2.5 percent at the end of 2016, and 3.625 percent at the end of 2017, according to the median.

Federal Open Market Committee participants said they don’t expect to reach their 2 percent target for inflation until 2016, the central tendency estimates in forecasts released today showed. The personal consumption expenditures price index will rise 1 percent to 1.6 percent next year, 1.7 percent to 2 percent in 2016, and 1.8 percent to 2 percent in 2017.

Fed Chair Janet Yellen will elaborate on the outlook at her press conference scheduled for 2:30 p.m. today in Washington.

The unemployment rate will average 5.2 percent to 5.3 percent in the final quarter of 2015, the Fed said, compared with an estimate of 5.4 percent to 5.6 percent in September.

Fed officials estimated the jobless rate at 5 to 5.2 percent in 2016, and at 4.9 percent to 5.3 percent in 2017, according to their estimates.

The central tendency projections for the longer-run growth rate ranged from 2 percent to 2.3 percent, unchanged from the September forecast.

Fed officials predicted the nation’s gross domestic product will rise 2.6 percent to 3 percent in 2015; 2.5 percent to 3 percent in 2016; and 2.3 percent to 2.5 percent in 2017.

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