the federal funds rate will likely be sufficient to get monetary policy to a neutral stance over the next few years. this view is consistent with the projections of appropriate monetary policy prepared by fomc participants in connection with our september meeting. 4 the median projection for the federal funds rate rises only gradually to 1. 1 percent at the end of next year, 1. 9 percent at the end of 2 / 3 bis central bankers'speeches 2018, and 2. 6 percent by the end of 2019. most participants also marked down their estimate of the longer - run normal federal funds rate, with the median now at 2. 9 percent. however, as we have noted on many previous occasions, policy is not on a preset course. the economic outlook is inherently uncertain, and our assessment of the appropriate path for the federal funds rate will change in response to changes to the economic outlook and associated risks. 1 i am grateful to james clouse and glenn follette of the federal reserve board staff for their assistance. views expressed are mine and are not necessarily those of the federal reserve board or the federal open market committee. 2 the september blue chip forecast projects real gdp to increase at an annual rate of 2. 9 percent in the third quarter and 2. 4 percent in the fourth quarter. 3 see board of governors of the federal reserve system ( 2016 ), “ federal reserve issues fomc statement, ” press release, september 21. 4 see board of governors of the federal reserve system ( 2016 ), “ federal reserve board and federal open market committee release economic projections from the september 20 – 21 fomc meeting, ” press release, ” september 21. 3 / 3 bis central bankers'speeches

in the energy sector, which has obviously been hard hit by the steep drop in oil prices. the recent stabilization of rig counts in the united states suggests that this source of restraint on business investment may be coming to an end. that said, business investment outside of the energy sector has been unusually soft for the past three quarters, and this weakness will bear close watching. perhaps investment is being held down as firms respond to the flat trajectories for manufacturing and exports, reflecting subdued foreign demand and the appreciation of the dollar since mid - 2014. another possibility could be that firms are reassessing the prospects for growth and profitability in an environment of weak productivity growth and are accordingly scaling back investment plans. notwithstanding these downside possibilities, i expect that business investment will pick up in the second half of the year as the drag from the oil sector wanes and as firms expand capacity to meet rising demand. the combination of strong job gains and lackluster gdp growth over the past four quarters reflects exceptionally poor labor productivity growth. indeed, productivity declined 1 / 2 percent 1 / 3 bis central bankers'speeches over the most recent four quarters and has increased only about 1 / 4 percent per year, on average, since 2011. while improving labor market conditions have led to higher household incomes in recent years, the key to improved living standards over the long haul will be a revival in productivity growth — at least to more normal levels, possibly in the range of 1 - 1 / 2 percent per annum. foreign economies have been growing at a moderate pace, even in the face of numerous shocks, including concerns about china ’ s exchange regime at the start of the year and brexit over the summer. the economic effects of the steep appreciation of the dollar that began in mid2014 have begun to fade, and u. s. exports have returned to growth following a weak 2015. turning to inflation, i believe that transitory effects of the fall in oil prices and the rise in the dollar are the primary reason that inflation has fallen short of the fomc ’ s 2 percent goal. total personal consumption expenditures ( pce ) inflation was 1 percent in august on a 12 - month basis, held down by earlier declines in gasoline prices, but core pce inflation has moved up somewhat, and its 12 - month change stood at 1. 7 percent in august. as oil prices and the dollar stabilize, the drag on consumer price inflation from these sources ought to dissipate, and inflation will likely move