Fed Hikes Rates, Predicts a Strong-ish Economy Into 2020

The Federal Reserve increased its benchmark short-term interest rates, while also signaling that additional hikes are expected for this year.

The Federal Open Market Committee has not only raised the federal funds rate from 1.75 percent to 2 percent—as was universally expected—the central bank has also released its projections for the U.S. economy in the next few years.

For instance, the Fed predicts that real gross domestic product for the country will be 2.8 percent in 2018, 2.4 percent in 2019 and 2 percent in 2020. These are median figures of a narrow range of predicted growth.

By the year’s end, the Fed predicts, the median unemployment rate for the country will have been 3.6 percent, a bit down from the current rate of 3.8 percent. That presumes a strong job market for the rest of the year. The central bank’s forecast for unemployment in 2019 and 2020 is 3.5 percent.

Though inflation spiked a bit last month, the Fed is persuaded that the rate will come in at 2.1 percent for all of 2018—and all of 2019 and ’20 for that matter. The Fed also predicted that the federal funds rate will keep edging up, from a median of 2.4 percent this year to 3.1 percent next year, and 3.4 percent by 2020.