US Fed expects slower growth, lower inflation next year and 2017 as it postpones rate hike

Economic Indicators Associated Press

Federal Reserve policymakers have slightly lowered their projections for growth and inflation in the next two years, an outlook that likely factored into their decision to hold off on raising interest rates.

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The Fed also reduced its estimate for long-run unemployment to 4.9 percent from 5 percent. This suggests that it is willing to wait for unemployment to fall further before cutting rates. Unemployment stands at 5.1 percent.

And Fed policymakers now see just one rate hike likely to take place this year, down from two in their previous forecast, issued in June.

The Fed now expects that its preferred measure of inflation will rise only 0.4 percent this year, down from 0.7 percent in June. Both are far from the Fed's target of 2 percent.