The Federal Reserve will raise interest rates far more slowly than previously expected, according to the central bank's updated "dot plot." The Fed's latest dot plot shows that top officials expect the median federal funds rate, now near zero, to rise to 0.625% by end of 2015 instead of 1.125% as predicted in December. For 2016, the median rate is expected to end at 1.875% instead of 2.5%. In the "longer run," the Fed sees the median rate climbing to 3.75%, the same as before. The slower pace of rate hikes likely stems from the Fed's more subdued assessment of U.S. economic growth. The bank sees the economy growing 2.3% to 2.7% in 2015, below its prior target of 2.5% to 3%. Nor does the Fed see the U.S. growing more than 2.7% in 2016 or 2017, even with the unemployment expected to fall to as low as 4.8% from its current 5.5% level.
Copyright © 2015 MarketWatch, Inc.
Continue Reading Below