WASHINGTON (AP) — The Federal Reserve says it expects low unemployment and rising inflation will keep it on track to raise interest rates at a gradual pace over the next two years. By late 2019, the Fed says its key policy rate should be at a level that will be slightly restrictive for growth.

The Fed's projection on rate hikes came with release of the central bank's semi-annual monetary report to Congress. Fed Chairman Jerome Powell is scheduled to testify on the report for two days next week.

The Fed last month raised its policy rate for a second time this year and projected two more hikes in 2018. The monetary report says the expectation is that further hikes will leave the rate slightly above its neutral level by late next year.