“The median projection for the federal funds rate is 1.4 percent at the end of this year, 2.1 percent at the end of next year, and 3 percent at the end of 2019, in line with its estimated longer-run value. Compared with the projections made in December, the median path for the federal funds rate is essentially unchanged.” – Fed Chair Janet Yellen (March 15)
The Fed’s outlook on the economy hasn’t changed much since December. In turn, policy expectations are largely the same as well. Officials are comfortable enough in their outlooks to continue gradually normalizing monetary policy, but they don’t see enough pressure to move more rapidly.
Officials continue to expect GDP growth of around 2% over the course of this year and over the next two years. That’s largely because we are approaching full employment. While increased business optimism may fuel a pickup in the pace of business fixed investment in the near term, the consumer is the driving force. Jobs and wage growth will be the key drivers.