Fed Officials Predict Fed Funds Rate to Rise to 1.375% End-2015

Federal Reserve officials raised their median estimate for the federal funds rate at the end of 2015 to 1.375 percent, compared with 1.125 percent in June.

The rate will be at 3.75 percent at the end of 2017, the Fed said today for the first time as it included that year in its Summary of Economic Projections. That is the same as Fed officials’ longer-run estimate. The median estimate in June for the long-run fed funds rate was also 3.75 percent.

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

The central tendency estimate for the longer-run growth rate ranged from 2 percent to 2.3 percent, compared with 2.1 percent to 2.3 percent in June. A year ago, Fed officials forecast the economy’s potential growth rate at around 2.2 percent to 2.5 percent.

Fed officials’ central tendency estimates for 2017 showed gross domestic product expanding at 2.3 percent to 2.5 percent, with the inflation, measured by the personal consumption expenditures price index, rising by 1.9 percent to 2 percent. The unemployment rate will average 4.9 percent to 5.3 percent in the final quarter of that year.

The nation’s GDP will rise 2.6 percent to 3 percent in 2015, the projections showed, and 2.6 percent to 2.9 percent in 2016. The unemployment rate will range from 5.4 percent to 5.6 percent at the end of 2015 and 5.1 percent and 5.4 percent at the end of 2016, the Fed said.