NEW YORK – Most members of the Federal Open Market Committee believe rates should and will stay near zero until 2014, with few expecting rates to rise before then, according to projected policy paths released by the Fed Wednesday.
Seven members see 2014 as the right time to raise rates, three believe rates should go up this year, three see next year as right, and four see rates holding until 2015.
When talking specific numbers, fourteen members expect rates to stay near zero this year, with one expecting a rise to 0.50%, one projecting 1% as the right policy and one suggesting a 1.25% rate. Next year, a few more believe an increase would be appropriate, with 11 calling for rates near zero, one calling for a 0.75% rate, two saying 1% would be appropriate, one looking at 1.25% and two suggesting 1.75% would be right.
In 2014, member are more spread, with four still looking at near-zero rates, three at 0.50%, two at 1%, one at 1.50%, two at 2%, one at 2.25%, three at 2.50% and one at 2.75%.
The longer-term rates that members believe to be appropriate are mostly 4% to 4.50%, with one desiring 3.50% rates, one targeting 3.75%, six looking for 4% , two seeking 4.25%, and seven believing 4.50% is appropriate.
Projections of the central tendency of economic growth by the panel were generally higher than in January for this year (a 2.4% to 2.9% range, up from 2.2% to 2.7%), but lower in the next two years (down to 2.7% to 3.1% next year from 2.8% to 3.2% and off to 3.1% to 3.6% in 2014 from January’s estimated 3.3% to 4.0%) and the same for long-term (2.3% to 2.6%).
Panelists cut their projections for unemployment to 7.8% to 8.0% this year, a large revision from January’s prediction of 8.2% to 8.5%, to 7.3% to 7.7% next year and to 6.7% to 7.4% in 2014. Again, long-term projections for 5.2% to 6.0% unemployment remained the same.
Inflation outlooks were raised slightly, with projections now calling for inflation up to 2.0% each of the three years and longer term too. Core inflation predictions also expect 2.0% to be the high end of a tight range.