WASHINGTON – Federal Reserve officials are continuing to pencil in one more rate rise this year, and now expect the economy to take a little longer to achieve their official inflation goal, according to the central bank's latest official forecasts.
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Fed officials' median forecast for their interest rate target still has the overnight target rate at 1.4% for this year. The median fed funds rate forecast for 2018 is still at the 2.1% from the most recent forecast.
Over the longer run, officials now see the rate target at 2.8%, rather than 3%, with the current rate rise campaign largely complete by 2020.
The Fed's "dot plot" that maps out individuals individual views on the rate outlook showed 11 of 16 officials favoring an increase in 2017, while four want the Fed to hold steady through the remainder of the year. Most economists expect that boost in short-term borrowing costs to happen in December.
The Fed's outlook was released Wednesday as part of the announcement of the outcome of the interest-rate setting Federal Open Market Committee meeting. At the gathering officials maintained their overnight target rate range at 1% and 1.25%, as had been widely expected. They also announced they would begin shrinking their $4.5 trillion portfolio of securities starting next month.
The forecasts, which are released four times a year, update projections made in June. Over 2017, Fed policymakers have been dealing with unexpected weakness in inflation despite a very low jobless rate. The current outlook is attended by elevated uncertainty in the wake of major hurricanes striking America's south. The impact and recovery from those storms could affect the economy's performance over coming months.
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The Fed's forecast show officials expecting to achieve their 2% price rise target in 2019, rather than in 2018. For this year, they see inflation rising by 1.6%. Central bankers have been bedeviled by tepid inflation levels for years, and they've never achieved their inflation target since adopting it in 2012.
Fed officials said they see 2017 growth at 2.4%, versus the 2.2% seen in at the June meeting. For 2018 officials project the gross domestic product to expand by 2.1%, and by 2% in 2019. The longer run growth forecast stayed steady at 1.8%.
On the jobs front, officials believe what is now a 4.4% jobless rate will move to 4.3% this year. In 2018 the Fed sees unemployment moving to 4.1%. Longer run, unemployment is forecast to stand at 4.6%.
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(END) Dow Jones Newswires
September 20, 2017 14:15 ET (18:15 GMT)