The Federal Reserve has penciled in one additional 25-basis-point policy rate hike in 2026, according to the Summary of Economic Projections published on Wednesday. The September SEP was released alongside the Fed's decision to raise its benchmark interest rate to a target range of 3.75%-4.00%, its first increase in three years. From there, the median federal funds rate is now expected to land at 4.1% at the end of 2026, up from the June projection of 3.8%, hold steady at 4.1% in 2027, retreat to 3.9% in 2028, and reach 3.6% in 2029, a year newly introduced in the September dot plot, while the longer-run rate is seen at 3.2% versus 3.1% previously. The FOMC's median real GDP growth projection now stands at +2.3% for 2026 and +2.4% for 2027, with 2028 held at +2.2%, longer-run growth at +2.0% and 2029 at +2.1%, while the median unemployment rate was revised down to 4.1% for 2026 and 2027 from 4.3%, cut to 4.1% for 2028 from 4.2%, and held at 4.1% in 2029 against a longer-run projection of 4.2%. Core PCE inflation is now expected to finish 2026 at 3.4%, up from +3.3%, held at +2.5% for 2027, raised to +2.2% for 2028 from +2.1%, and seen at +2.0% for 2029. The September dot plot showed 18 dots, implying Fed Chair Kevin Warsh did not submit his dot again, with 2026 estimates largely concentrated at ~4.00% to ~4.25%.
Fed raised the benchmark rate to 3.75%-4.00% and penciled in one more 25bp hike in 2026, lifting the policy rate itself.
A higher-for-longer Fed policy path (rate hike plus upward-revised 2026 dot) pushes the 10-year Treasury yield up.
