Editor’s note: This article was update to add more detail and context.
The Federal Reserve raised the federal funds target range by 25 basis points to 3.75%-4.00% on Wednesday, marking its first rate increase since 2023.
In its policy statement, the Federal Open Market Committee said, “inflation remains elevated. Today’s policy action will support a timelier return to the Committee’s 2 percent goal. “
The decision was unanimous.
The updated dot plot showed the median official projecting a year-end 2026 fed funds rate of 4.1%, up from June’s 3.8% and implying one additional hike by December.
The 2027 median moved to 4.1% from 3.6% in June.
Fed Chair Kevin Warsh is slated to hold the press conference at 2:30 p.m. ET.
What September’s Fed Projections Show
The projections carried a hawkish edge well beyond this year.
The 2027 median jumped to 4.1% from 3.6% in June, wiping out the rate cuts officials had penciled in for next year and implying the funds rate stays at its 2026 peak through the whole of 2027.
The longer-run neutral estimate nudged up to 3.2% from 3.1%.
The forecast revisions explain the shift.
Officials marked their 2026 unemployment rate projection down to 4.1% from 4.3% in June and lifted this year’s real GDP growth estimate to 2.3% from 2.2%, while raising headline PCE inflation to 3.7% from 3.6% and core PCE to 3.4% from 3.3%.
In short: a stronger labor market and firmer inflation, with the return to 2% pushed out to 2029 on the headline measure.
September Summary of Economic Projections: Medians
| Variable | 2026 | 2027 | 2028 | 2029 | Longer run |
|---|---|---|---|---|---|
| Change in real GDP | 2.3 | 2.4 | 2.2 | 2.1 | 2.0 |
| June projection | 2.2 | 2.3 | 2.2 | — | 2.0 |
| Unemployment rate | 4.1 | 4.1 | 4.1 | 4.1 | 4.2 |
| June projection | 4.3 | 4.3 | 4.2 | — | 4.2 |
| PCE inflation | 3.7 | 2.3 | 2.1 | 2.0 | 2.0 |
| June projection | 3.6 | 2.3 | 2.0 | — | 2.0 |
| Core PCE inflation | 3.4 | 2.5 | 2.2 | 2.0 | — |
| June projection | 3.3 | 2.5 | 2.1 | — | — |
| Federal funds rate | 4.1 | 4.1 | 3.9 | 3.6 | 3.2 |
| June projection | 3.8 | 3.6 | 3.4 | — | 3.1 |
How Markets Reacted to the Fed Decision
The knee-jerk move was a sharp two-way whipsaw across every asset class.
Rates repriced first. The 2-year Treasury yield spiked as high as 4.65% within a minute of the release, retraced, then settled at 4.642%, roughly 3 basis points above where it sat before the announcement.
Gold – tracked by the SPDR Gold Shares (NYSE:GLD) – took the brunt of it. Spot bullion had been up 1.4% on the day at $4,360 an ounce heading into 2 p.m.; it slid to $4,332.81 within six minutes, turning negative at -0.25% and round-tripping the entire session’s rally.
The U.S. dollar index firmed 0.2% to 99.55.
Equities split along the same line they had traded all day.
The Nasdaq 100 pushed to a fresh session high at 29,225.84, up 0.3%, and the S&P 500 held a 0.1% gain at 7,623.90.
The Dow slipped 0.1% to 52,119.15 and the Russell 2000 gave up its advance to trade flat at 2,883.30.
Bitcoin (CRYPTO: BTC) rose 0.8% to $76,031.
Image: Shutterstock
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