Funds rate projected at 4.1 percent through 2027
Federal Open Market Committee participants raised their median federal funds rate projection to 4.1 percent for both 2026 and 2027. The updated September economic projections also show real GDP growth expanding by 2.3 percent this year alongside lower unemployment forecasts.
Upgraded trajectory for benchmark rates
The Federal Open Market Committee median projection places the federal funds rate at 4.1 percent at the end of 2026 and 2027, before easing to 3.9 percent in 2028 and 3.6 percent in 2029.
In the longer run, participants anticipate a terminal rate of 3.2 percent.
Core PCE inflation is projected to reach 3.4 percent in 2026 and decline to 2.5 percent in 2027, 2.2 percent in 2028, and the 2.0 percent target by 2029.
Headline PCE inflation shows a similar trajectory, reaching 3.7 percent in 2026 before cooling to 2.3 percent in 2027 and 2.0 percent by 2029.
Real GDP growth is projected at 2.3 percent in 2026, 2.4 percent in 2027, and 2.2 percent in 2028, with longer-run growth anchored at 2.0 percent.
Shifting expectations since June
Compared to the June projections, policymakers upgraded their rate path from 3.8 percent in 2026 and 3.6 percent in 2027, reflecting firmer price dynamics.
Unemployment rate projections were revised downward to 4.1 percent across 2026, 2027, and 2028, compared to June expectations of 4.3 percent and 4.2 percent.
Eighteen participants submitted economic projections, with the central tendency for the 2026 policy rate tightening to a 4.1 to 4.4 percent corridor.
No rush toward rate cuts
The upward revision in policy rate dots reveals a central bank resigned to higher borrowing costs for longer.
While resilient growth and lower unemployment prevent an immediate downturn, stubborn inflation keeps monetary policy restrictive.
For borrowers and markets, the timeline for meaningful rate relief has once again been postponed.