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Fed Funds Rate Prediction: 2.5% by 2016

The Fed also predicted the interbanking lending rate will reach 1% by next year, up from the current 0.25% target.

By Michael Muckian | Updated on August 20, 2014
Fed Funds rateThe Federal Reserve’s Fed Funds rate is expected to reach 2.5% by the end of 2016, according to the August NCUA Report.

As illustrated in the NCUA’s graph shown at left (click on the graph to expand), Fed policymakers predicted short-term interest rates will begin rising at some point in 2015, with an average rate of 1% predicted by the group by year-end. The lowest rate predicted for 2015 was 0.25% and the highest was 3%.

If economic conditions remain robust, the group of Fed board members and bank presidents predicted the Fed Funds rate will rise to 2.5% by the end of 2016. The lowest prediction was 0.5% and the highest was 4.25%.

 “The improving economy brings with it lots of positives for credit unions,” NCUA Chief Economist John Worth said during the August Economic Update video cited in the NCUA’s monthly newsletter. “But at the same time a sustained pick up in the general economy brings the potential for interest rates to rise.”

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