Fed raises 2026 rate projection to 3.8 percent

Federal Open Market Committee participants significantly revised their economic projections for 2026 and 2027 in June.

The median federal funds rate projection for 2026 increased to 3.8 percent, up from 3.4 percent in March.

For 2027, the median rate projection also rose to 3.6 percent, compared to 3.1 percent previously.

Concurrently, the median projection for PCE inflation in 2026 saw a notable jump to 3.6 percent, from 2.7 percent in March.

Core PCE inflation for 2026 was also revised upwards to 3.3 percent, from 2.7 percent.

These adjustments reflect participants' updated assessments of appropriate monetary policy to achieve maximum employment and price stability.

Longer-run projections for the federal funds rate remained stable at 3.1 percent, and for PCE inflation at 2.0 percent, indicating a belief in eventual convergence to target levels.

The Summary of Economic Projections (SEP) offers a forward-looking view from individual FOMC participants on key economic variables.

These include real gross domestic product (GDP) growth, the unemployment rate, and inflation, along with their assessment of the appropriate path for the federal funds rate.

Each projection is based on information available at the time of the meeting, reflecting the participant's individual interpretation of the Fed's dual mandate for maximum employment and price stability.

Longer-run projections represent the expected convergence value under appropriate monetary policy and in the absence of further economic shocks.

For the June meeting, 18 participants submitted their projections, compared to 19 in March.