Tightening Likely in 2014 or 2015, Fed Says

WASHINGTON – Most members of the Federal Reserve Bank continue to view 2014 as the most appropriate time for tightening, with seven of 19 participants choosing that year as the right time for policy firming in the Fed’s latest summary of economic projections released Wednesday.

Almost as many of the anonymous members chose 2015, with six opting for that year and three each selecting 2012 and 2013.

Most of the members see the target Fed funds rate staying at zero to 0.25% through the end of this year, with two members expecting a 25 basis point hike before year end and one seeing a hike to 0.75% by December. A few more start seeing the rates rise in 2013, with four members seeing the rate at or above 1% next year.

Over the long term, the rate is expected to be 4% to 4.5%, according to predictions.

The other projections by the panel cut change in real GDP projections for this year and next, with a slight increase in projections for 2014. The panel now expects GDP to rise between 1.9% and 2.4% this year, 2.2% to 2.8% next year and 3.0% to 3.5% in 2014.

The group sees unemployment trending lower than it did in April, with expectations for unemployment rates of 8.0% to 8.2% this year, 7.5% to 8.0% by the end of 2013, and 7.0% to 7.7% in 2014.

Inflation rate projections for this year dropped sharply compared to the April projections, falling to 1.2% to 1.7%, but stayed steady with the April estimates in projecting an inflation rate hovering between 1.6% and 2.0% in both 2013 and 2014.

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