Fed Officials Targeting Rate Hike, or Hikes, in 2015

24/7 Wall St. would remind readers that most market participants in stocks and bonds are calling for the Fed Funds rate to be raised to 0.25% in the September to October period and then to 0.50% level during the first quarter of 2015.

The FOMC acknowledged the growth rebound seen from the weaker data earlier in the year. The vote was 10-0 to keep rates steady at the 0.00% to 0.25% target rate. Still, most Fed officials see one or two rate hikes seen during 2015:

• Fed Officials see Fed Funds rate at a median of 0.625% at end of 2015;
• Fed officials see Fed Funds rate at a median of 3.750% in the longer run — with a median of 1.625% at the end of 2016 and at 2.875% at the end of 2017.
• 2 Fed officials see the first rate hike in 2016;
• and 15 of 17 Fed officials sees the first rate hike in 2015.

Other Fed projections with longer-term outlooks are as follows:

• Core Inflation: 1.3% to 1.4% in 2015; 1.6% to 1.9% in 2016; and 1.9% to 2.0% in 2017.
• Nominal Inflation: 0.6% to 0.8% in 2015; 1.6% to 1.9% in 2016; and 1.9% to 2.0% in 2017.
• Unemployment: 5.0% to 5.2% in the longer run, which is unchanged from March. Other targets were 5.2% to 5.3% late in 2015; 4.9% to 5.1% in late 2016; and 4.9% to 5.1% in late 2017.
• GDP is targeted as being 2.0% to 2.3% in the longer run, unchanged from March. The other years are targeted with GDP growth of 1.8% to 2.0% in 2015; 2.4% to 2.7% in 2016; 2.1% and 2.5% in 2017.

The key guts of the commentary from the official statement is as follows:

The Committee expects that, with appropriate policy accommodation, economic activity will expand at a moderate pace, with labor market indicators continuing to move toward levels the Committee judges consistent with its dual mandate. The Committee continues to see the risks to the outlook for economic activity and the labor market as nearly balanced. Inflation is anticipated to remain near its recent low level in the near term, but the Committee expects inflation to rise gradually toward 2 percent over the medium term as the labor market improves further and the transitory effects of earlier declines in energy and import prices dissipate… the Committee today reaffirmed its view that the current 0 to 1/4 percent target range for the federal funds rate remains appropriate. In determining how long to maintain this target range, the Committee will assess progress–both realized and expected–toward its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term.

FULL FED TARGETS ARE HERE