FOMC participants project higher inflation and federal funds rate

The Federal Open Market Committee's latest Summary of Economic Projections reveals an upward revision to median forecasts for key economic indicators.

For 2026, the median projection for PCE inflation increased to 2.7 percent from 2.4 percent in December, while core PCE inflation rose to 2.7 percent from 2.5 percent.

Real GDP growth for 2026 was also revised up to 2.4 percent from 2.3 percent.

Significant upward adjustments were made for 2027, with GDP growth now at 2.3 percent (up from 2.0 percent) and PCE inflation at 2.2 percent (up from 2.1 percent).

The longer-run projection for real GDP growth saw an increase to 2.0 percent from 1.8 percent.

The unemployment rate projection for 2027 saw a minor increase to 4.3 percent from 4.2 percent.

The individual projections for the federal funds rate, often referred to as the 'dot plot,' reveal a range of views among FOMC participants, even as the median for 2026-2028 remains stable.

The longer-run median for the federal funds rate, however, increased by 10 basis points to 3.1 percent.

Participants base their projections on their assessment of 'appropriate monetary policy' to achieve maximum employment and price stability.

While uncertainty regarding GDP growth and the unemployment rate is generally viewed as 'broadly similar' to historical levels, a notable portion of participants perceive risks to PCE inflation as 'weighted to the upside,' indicating ongoing concerns about price stability.