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2026-09-17 10:00:10
[“Fed’s mouthpiece”: Fed’s long-term interest rate expectations have shifted significantly upward; more than half of officials believe 3.6% or higher is needed in 2029] (1) Nick Timiraos, a “Fed’s mouthpiece,” said that when the Fed began cutting interest rates two years ago, 10 policymakers believed that rates would eventually fall below 3%, 7 believed they would rise above 3%, and 2 predicted the rate to be 3%. (2) Now, only 1 policymaker predicts that “long-term” interest rates will fall below 3%, 11 believe they will rise above 3%, and 6 believe the rate will be 3%. (3) Usually, people have little reaction to the forecasts for very distant years in the Summary of Economic Projections (SEP) because these forecasts are mainly illustrative, showing only the scenario of inflation falling to 2% and interest rates converging towards the long-term neutral level. (4) But the 2029 forecast data released today is noteworthy: of the 17 policymakers who submitted forecasts, more than half believe that interest rates need to be maintained at 3.6% or higher to bring inflation down to 2%—the level of interest rates for the whole year before this week’s rate hike. (5) This highlights the upside risks to long-term interest rate forecasts.
