The unemployment rate continues to slide, hitting 4.4 percent in April. The Federal Reserve’s median forecast for joblessness -- 4.5 percent from the end of 2017 through 2019 -- has once again proved optimistic. But does this mean that Fed officials will hike their interest rate projections at the next Open Market Committee meeting?
Not necessarily. There are a lot of moving pieces in the Fed’s rate forecast, and there is a good chance that at least one of them will offset the impact of a declining unemployment rate. If there is no offset, then the central bank is making a pretty big bet that the economy is close to a tipping point that requires further tightening to keep the odds of overheating at a minimum.