Today the Federal Open Market Committee decided to raise the target range for the federal funds rate by ¼ percentage point, bringing it to ½ to ¾ percent. This decision recognizes the considerable progress the economy has made toward our dual objectives of maximum employment and price stability. Over the past year, 2¼ million net new jobs have been created, unemployment has fallen further, and inflation has moved closer to our longer-run goal of 2 percent. We expect the economy will continue to perform well, with the job market strengthening further and inflation rising to 2 percent over the next couple of years.
Economic growth has picked up since the middle of the year, with household spending continuing to rise at a moderate pace, supported by income gains and relatively high levels of consumer sentiment and wealth. Business investment, however, remains soft despite some stabilization in the energy sector. Overall, we expect the economy will expand at a moderate pace over the next few years.
Job gains averaged nearly 180,000 per month over the past three months, maintaining the solid pace seen since the beginning of the year. Over the past seven years, since the depths of the Great Recession, more than 15 million jobs have been added to the U.S. economy. The unemployment rate fell to 4.6 percent in November, the lowest level since 2007, prior to the recession. Broader measures of labor market slack have also moved lower, and participation in the labor force has been little changed, on net, for about two years now, a further sign of improved conditions in the labor market.
Turning to inflation, the 12-month change in the price index for personal consumption expenditures was nearly 1½ percent in October, still short of our 2 percent objective but up more than a percentage point from a year earlier. Core inflation, which excludes energy and food prices, has risen to 1¾ percent. As the transitory influences of earlier declines in energy prices and prices of imports continue to fade and as the job market strengthens further, we expect overall inflation to rise to 2 percent over the next couple of years.
Our inflation outlook rests importantly on our judgment that longer-run inflation expectations remain reasonably well anchored. Market-based measures of inflation compensation have moved up considerably but are still low. Survey-based measures of longer-run inflation expectations are, on balance, little changed. Of course, we remain committed to our 2 percent inflation objective and will continue to carefully monitor actual and expected progress toward this goal.
The median projection for growth of inflation-adjusted gross domestic product rises from 1.9 percent this year to 2.1 percent in 2017 and stays close to 2 percent in 2018 and 2019, slightly above its estimated longer-run rate. The median projection for the unemployment rate stands at 4.7 percent in the fourth quarter of this year. Over the next three years, the median unemployment rate runs at 4.5 percent, modestly below the median estimate of its longer-run normal rate. Finally, the median inflation projection is 1.5 percent this year and rises to 1.9 percent next year and 2 percent in 2018 and 2019.
The Committee judged that a modest increase in the federal funds rate is appropriate in light of the solid progress we have seen toward our goals of maximum employment and 2 percent inflation. We continue to expect that the evolution of the economy will warrant only gradual increases in the federal funds rate over time to achieve and maintain our objectives. This view is consistent with participants' projections of appropriate monetary policy.
The median projection for the federal funds rate rises to 1.4 percent at the end of next year, 2.1 percent at the end of 2018, and 2.9 percent by the end of 2019. Compared with the projections made in September, the median path for the federal funds rate has been revised up just ¼ percentage point. Only a few participants altered their estimate of the longer-run normal federal funds rate, although the median edged up to 3 percent.
Of course, the economic outlook is highly uncertain, and participants will adjust their assessments of the appropriate path for the federal funds rate in response to changes to the economic outlook and associated risks. As many observers have noted, changes in fiscal policy or other economic policies could potentially affect the economic outlook. In making our policy decisions, we will continue—as always—to assess economic conditions relative to our objectives of maximum employment and 2 percent inflation.
