Thursday, June 16, 2016

The Fed Looks Into the Future

The big news from yesterday is that the Federal Reserve decided not to hike interest rates at its just-concluded June meeting. But the Fed did indicate that it still expects to raise interest rates twice in 2016, from the current target range of 0.25 percent to 0.50 percent.

At the same time, the Fed predicts three rate hikes in both 2017 and 2018, down from four in its March forecast.  In materials released by the Fed with its interest-rate announcement today, the Fed pushed down its estimate of rates in the future to 1.6 percent in 2017 and 2.4 percent in 2018.

The disturbing side of this is the Fed's pessimism on economic growth. Their forecast now sees U.S. growth topping out at 2 percent in the long run, well below the nation’s historic 3.3 percent growth rate.

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