2:45 PM, Sep 20, 2017 — Another interest-rate increase is projected to come before the end of 2017, while longer-term views on the benchmark Fed funds rate were lowered by Federal Open Market Committee members, who opted to keep the target range unchanged on Wednesday.
According to a summary of economic projections, the median average for 2017 implies another 25 basis-point rate increase, unchanged from June’s outlook. For 2018 the so-called dot plots show a projected Fed funds rate of 2.1%, which would imply three further increases of 25 basis points each. That was also unchanged from June.
The dots showed an expected median of 2.7% in 2019, down from 2.9% projected earlier, and a longer-run rate of 2.8%, compared with June’s outlook for 3%.
The FOMC opted to keep the current range at 1% to 1.25%, saying that while recent hurricanes will likely offer a temporary boost to inflation, consumer price increases on a 12-month basis are expected to “remain somewhat below 2% in the near term,” according to the statement.
Hurricanes Harvey, Irma and Maria “have devastated many communities,” but are not likely to alter the course of the economy over the medium term, the FOMC said. In fact, the median expectation among members for 2017 gross domestic product growth was increased to 2.4% from June’s outlook of 2.2%. The projection for 2018 was held at 2.1% and 2019 was raised to 2% from 1.9% previously.
For core inflation, the FOMC members see a median of 1.5% for this year, down from 1.7% projected in June. And 2018 was lowered to 1.9% from 2% previously.
The FOMC said that normalizing the $4.5 trillion balance, as outlined in June, will begin next month, although specific details weren’t given in the statement.