Fed expects a __% inflation rate by the end of this year.

• A. 2.5%
• B. 2.9%
• C. 2.7%
• D. 3.0%

Answer: (C)

Inflation forecasts come from the Fed’s own projection of the PCE price index, and the year-end figure shows what policymakers expect for inflation at that point in time. The value at year-end reflects the balance of slowing prices as policy tightens and the impact of recent data, while still typically remaining a bit above the 2% target in many scenarios. The option that matches the Fed’s published year-end forecast is 2.7%, which indicates inflation is expected to ease toward the target but not quite reach it by year-end. The other numbers would imply forecasts that are either closer to the target (2.5%) or notably higher (2.9% and 3.0%), so 2.7% is the best reflection of the stated expectation.