As Fed officials make their decisions at their remaining four meetings of 2016, the issue that hangs over them is as complex as ever. The Fed Thinks It Will Raise Rates Much More Than the Markets Expect Expected short-term interest rates % 3 2 1 0 Market forecast Fed forecast (March) Fed forecast (June) 2017 2018 2019 Expected short-term interest rates % 3 2 1 0 Market forecast Fed forecast (March) Fed forecast (June) 2017 2018 2019But even with those distortions, Ms. Yellen and the Fed face danger if they ignore these market signals entirely. Fed officials envision a 2.4 percent interest rate target at the end of 2018, versus 0.6 percent that is priced into the markets. Fed officials see inflation rising to its target of 2 percent by 2018 and staying there; the price of inflation-protected bonds implies it will be much lower. Two years ago, for example, the median projection among Fed officials was that its interest rate target would be 2.5 percent at the end of 2016.

Source: New York Times June 15, 2016 20:26 UTC