Staff economists at the US Federal Reserve expect a quarter-point US interest rate increase this year, according to forecasts the Fed mistakenly published on its Web site in a gaffe that drew criticism about its ability to keep secrets.
The rate forecast was included with a series of bearish projections on US economic growth and inflation that were presented to policymakers at their June 16-17 meeting.
Later on Friday evening, the Fed said the inadvertently released document was not the correct document. It provided a new table showing slightly lower outlooks for GDP and inflation this year, as well as other revisions.
Photo: Bloomberg
Federal prosecutors are currently probing an alleged leak at the Fed of market-sensitive information to a private financial newsletter in 2012.
“It regrettably appears once again that proper internal controls are not in place to safeguard confidential Federal Reserve information,” said US Representative Jeb Hensarling of Texas, a Republican who chairs the US House of Representatives Financial Services Committee and is pressing Fed Chair Janet Yellen for documents regarding the 2012 leak.
The Fed said in a statement that the forecasts were “inadvertently” included in a computer file posted to its Web site on June 29.
Fed officials said the disclosure was due to procedural errors at a staff level and that the mistake was discovered on Tuesday.
The matter has been referred to the Fed’s inspector general.
The forecasts do not represent the views of the central bankers who set interest rate policy. Those policymakers, many based outside of Washington in regional Fed branches, create their own forecasts, the most recent of which were released on June 17.
However, Fed Board of Governors’ staff views are sensitive and influential enough that the Fed normally releases them about five years after they were made.
In the projections prepared last month, and in the revised table released on Friday, the staff expected policymakers would raise their benchmark interest rate, known as the Fed funds rate, enough for it to average 0.35 percent in the fourth quarter.
That implies one quarter-point hike this year, as the Fed funds rate is currently hovering at about 0.13 percent.
Analysts at JPMorgan and Barclays said this suggested the staff expected a rate hike before a scheduled Dec. 15-16 policy meeting.
The Fed also has policy meetings scheduled for July 28-29, Sept. 16-17 and Oct. 27-28.
All but two of the Fed’s 17 policymakers said last month they think rates should rise this month.
They were divided between whether it would be best to raise rates once or twice this year.
The staff views were less optimistic about the economy than several key policymaker forecasts.
In the revised projections, which stretched from this year to 2020, the staff did not expect inflation to ever reach the Fed’s 2 percent target. By the fourth quarter of 2020, they saw the PCE (personal consumption expenditure) inflation index rising 1.97 percent from a year earlier.
The Fed’s staff also took a dimmer view of long-run economic growth, expecting GDP to expand 1.73 percent in the year through the fourth quarter of 2020. The views of Fed policymakers for long-term growth range from 1.8 percent to 2.5 percent.
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