Fed Leaves Rates Unchanged, Projects One Cut in 2026

Summary

• The Federal Reserve left interest rates unchanged, with an 11-1 vote to hold the benchmark rate in a range of 3.5% to 3.75%.
• The committee's projections now forecast only one rate cut in 2026, down from prior expectations, reflecting a more hawkish shift.
• Inflation forecasts were revised upward: PCE inflation for 2024 is now seen at 2.7% (up from 2.4%) and core PCE at 2.7% (up from 2.5%).
• Growth forecasts were modestly upgraded, with GDP now expected at 2.4% in 2024 (up 0.1%) and 2.3% in 2025.
• The unemployment rate forecast for 2026 was raised to 4.4% from 4.2% previously.
• The long-run estimate for the Fed Funds rate, a proxy for the neutral rate, increased to 3.1%.
• The sole dissenter, Stephen Myron, favored a 25 basis point cut at this meeting and still projects 100 basis points of cuts in 2024.
• The official policy statement's language on future adjustments remained unchanged despite the significant upgrade to inflation projections in the economic outlook.
• The Fed cited uncertainty from developments in the Middle East and stated it remains attentive to two-sided risks.