"Why You Might Pencil in a 3.5% Fed Funds Rate in 2017"

From Real Time Economics:

HILSENRATH’S TAKE: WHY YOU MIGHT PENCIL IN A 3.5% FED FUNDS RATE IN 2017
Federal Reserve officials will be updating their forecasts for the economy at their policy meeting next week, including for the first time estimates for growth, unemployment, inflation and interest rates in 2017. What will the world look like to the Fed in three years’ time?

To take measure of how Fed officials might see the world, The Wall Street Journal asked private sector economists for their own 2017 forecasts in our latest monthly survey.

They see the Fed slowly continuing a cycle of interest rate increases by then. The median estimate for the Fed’s benchmark federal funds rate in the fourth quarter of 2017 was 3.5%, a touch below the Fed’s estimate of the long-run equilibrium for the interest rate of 3.75%. The median estimate among surveyed economists for the fed funds rate at the end of 2016 is 2.5% and at the end of 2015 it is 1%, compared to near-zero now.

It has the makings of a shallow interest rate cycle, in line with the growing perception that the U.S. economy’s long-run growth potential has slowed. By comparison, the fed funds rate went up to 5.25% in 2006 and hit 6.5% in 2000....MORE