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Fed increases estimate for key rate at end of 2015

September 17, 2014

WASHINGTON (AP) — Federal Reserve policymakers have slightly increased their estimate of what the Fed’s benchmark interest rate should be at the end of 2015 compared with their estimate three months ago.

The Fed has kept its benchmark rate at a record-low level near zero since 2008 to try to boost economic growth. Most economists expect the first rate increase to happen by the middle of next year. A Fed statement indicated little change in the timing of that first increase.

The median short-term interest rate supported by Fed policymakers at the end of 2015 is now 1.38 percent, up from 1.13 percent at its June meeting.

The Fed also forecasts only modest growth for the U.S. economy through 2017.

Fed policymakers now expect the economy to grow just 2 percent to 2.2 percent this year, down slightly from their June forecast of 2.1 percent to 2.3 percent. That reduction likely reflects the sharp contraction in the first quarter of this year: 2.1 percent at an annual rate. The economy has rebounded solidly since then.

Policymakers forecast growth of 2.6 percent to 3 percent in 2015, down from an earlier forecast of 3 percent to 3.2 percent.

Growth is expected to be 2.6 to 2.9 percent in 2016, little changed from the Fed’s previous estimate. And in 2017, it foresees growth of just 2.3 percent to 2.5 percent. That’s below the roughly 3 percent that’s consistent with a healthy economy.

The central bank updates its economic projections four times a year. The forecasts serve as guides for its interest rate decisions.

The interest rate figures are based on the stated preferences of each member of the Fed’s policymaking committee.

Fed chair Janet Yellen has cautioned reading too much into the interest rate figures.

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