The Fed cut interest rates by 25bps to 3.50–3.75%, fully in line with expectations. The decision was done by a three way split. Governor Stephen Miran again voting for a larger 50bps reduction. Meanwhile Chicago Fed Austan Goolsbee and Kansas City Fed Jeffrey Schmid voted for no change. All other policymakers supported the quarter-point move.
The new projections signaled remarkable continuity. The federal funds rate path was left unchanged, with policymakers still expecting the policy rate to fall to 3.4% by the end of 2026, then 3.10% by the end of 2027, and remain there through 2028. This implies one 25bps cut per year in both 2026 and 2027.
Growth expectations, however, were revised meaningfully higher. GDP is now projected to expand 2.3% in 2026, up from 1.8% previously, and to grow 2.0% in 2027 and 1.9% in 2028. Labor-market projections were largely steady, with unemployment expected to be 4.4% in 2026, unchanged from prior forecasts. The rate for 2027 was nudged down from 4.3% to 4.2%, with 2028 left at 4.2%. Policymakers continue to signal a soft-landing baseline, where job markets cool without a material rise in unemployment.
Inflation projections were modestly lowered. Headline PCE is now expected at 2.4% in 2026, down from 2.6%, while the forecasts for 2027 and 2028 remain at 2.1% and 2.0%. Core PCE was trimmed to 2.5% for 2026 and left unchanged thereafter.
