Most Fed Members See No Hikes Before 2014

Nearly one-third of Federal Open Market Committee members expect the next policy firming to be in 2014, with almost as many seeing the first tightening in 2015, according to projections released Wednesday by the Fed.

The anonymous projections show the most popular choice for the next policy tightening was 2014, with five of the 17 members predicting a rate hike that year. Four felt that it would be 2015 before monetary policy would change. Two expect the rates to be held until 2016. On the other side, three members each predicted tightening in 2012 and 2013.

The lion’s share of members see the target federal funds rate staying at zero to 0.25% at the end of this year, with one member expecting a 25 basis point hike before year-end and two seeing a hike to 1% by December.

A few more start seeing the rates rise in 2013, with one expecting a 0.50% target, two a 0.75% target, one a 1% rate, and one each a 1.75% and 2% rate.

While the plurality expects rates still to be zero to 0.25% at the end of 2014, two see the rate going up to 0.50%, one to 0.75%, two to 1%, one each to 1.50% and 2%, three to 2.50%, and one to 2.75%.

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

The other projections by the panel cut change in real gross domestic product projections for this year and next, and slightly increased its projections for 2014.

The group sees unemployment trending lower than it did in November. Inflation rate projections were pretty close to November’s predictions in both the headline and core numbers.

The Fed warned that projections are valid only without economic shocks.

For reprint and licensing requests for this article, click here.
MORE FROM BOND BUYER