The Federal Reserve Raises Rates a Quarter Point and Its Projections Add Another Rise This Year
The Federal Reserve raised the target range for the federal funds rate by a quarter percentage point to 3.75 to 4 percent on Wednesday, on a statement approved by a 12 to 0 vote, and its new projections carry the sharper message: the median forecast puts the rate at 4.1 percent at the end of this year, one more quarter point, on our reading, above where Wednesday’s move leaves it, and still at 4.1 percent at the end of 2027. The first market reading was calm: the S&P 500 traded 0.38 percent higher and the 10 year Treasury yield eased to 4.957 percent at our 18:04 GMT capture, minutes after the release.
A short statement, a unanimous vote and a sentence built to be quoted
The statement is short and declarative, and it closes on a line written to be repeated: “Today’s policy action will support a timelier return to the Committee’s 2 percent goal. The Committee will deliver price stability.” The Committee’s description of the economy is confident throughout: activity “is expanding at a solid pace”, domestic spending “has been resilient” even with uncertainty elevated in part on geopolitical developments, productivity growth “is strong”, capital investment “is robust”, job gains “have kept pace with the workforce”, and inflation “remains elevated”, the one line that carries the rise. The vote was 12 to 0, and the Board separately voted unanimously to lift the rate paid on reserve balances to 3.90 percent from 17 September. The action was almost fully priced before it landed: Fed funds futures had put the probability near 92.5 percent in the morning, per the CME FedWatch tool as cited by the network, from about 33 percent a month ago.
The projections do the signaling: one more rise, and no cuts on the median through 2027
The quarterly projections moved further than the rate did. The median path for the federal funds rate now reads 4.1 percent for the end of 2026, against a 3.875 percent midpoint after Wednesday’s move, which is one more quarter point this year on our reading of the table, and it holds at 4.1 percent through the end of 2027, where June’s projections had shown 3.6 percent, before easing to 3.9 percent in 2028 and a 3.2 percent longer run. The economic forecasts explain the path: growth this year was revised up to 2.3 percent from 2.2 in June and to 2.4 percent for 2027, the unemployment forecast was cut to 4.1 percent from June’s 4.3 and held there across the horizon, and inflation on the PCE measure was marked up to 3.7 percent for this year, from 3.6, before a fall to 2.3 percent in 2027 and 2 percent by 2029, with the core measure at 3.4 percent this year.
The September projections
| Median, percent | 2026 | 2027 | 2028 |
|---|---|---|---|
| Federal funds rate | 4.1 | 4.1 | 3.9 |
| PCE inflation | 3.7 | 2.3 | 2.1 |
| Core PCE inflation | 3.4 | 2.5 | 2.2 |
| Change in real GDP | 2.3 | 2.4 | 2.2 |
| Unemployment rate | 4.1 | 4.1 | 4.1 |
Medians of Federal Open Market Committee participants’ projections, September 2026, in percent, from the Federal Reserve’s summary of economic projections released with the statement; GDP and inflation are fourth quarter over fourth quarter, unemployment is the fourth quarter average. Longer run medians: federal funds rate 3.2, growth 2.0, unemployment 4.2, PCE inflation 2.0.
Why it matters: the rise itself was the least of Wednesday’s news, on our reading: what moved is the path, with the medians adding a rise this year and removing the cuts that June’s table still carried for 2027, against an economy the Committee now forecasts as stronger on growth, tighter on unemployment and hotter on this year’s inflation. That is a central bank pricing persistence rather than an emergency, and the first minutes of trading took it that way, with equities steady and the 10 year yield easing back below 5 percent at our capture after closing at that level on Tuesday’s official curve.
Outlook: the Committee’s next scheduled meetings are 27 to 28 October and 8 to 9 December, the latter with fresh projections, per its own calendar. Our United States wrap tonight carries the full session’s reaction across the board, the sectors and the Treasury curve, and Thursday’s sessions from Asia through Europe are the first full days to trade the new path. The Bank of Japan decides on Friday. The market’s own test is unchanged from this week’s wraps: whether the 10 year holds the 5 percent line now that the path above it is on paper.
Sources: Federal Reserve, CNBC, The Edge.
