The Federal Reserve on Wednesday said it expects to cut rates once in 2026 while officials anticipate faster economic growth and hotter inflation this year than previously forecast.
The central bank’s latest policy decision on Wednesday — which saw the Fed keep rates unchanged in a range of 3.5%-3.75% — also came alongside the release of the Fed’s latest Summary of Economic Projections (SEP). The SEP includes forecasts for growth, inflation, the labor market, and interest rates from members of the Federal Open Market Committee.
In December, the last time Fed officials published their outlooks, forecasts called for one 0.25% rate cut in 2026, followed by two rate cuts of the same size in 2027. Those forecasts were unchanged this month, and a new outlook for 2028 sees the Fed keeping rates steady in a 3%-3.25% range two years out.
Wednesday’s SEP showed that Fed officials now see inflation on both a headline and “core” basis standing at 2.7% at the end of this year. The Fed targets inflation that averages 2%. In December, the central bank expected core inflation — which strips out the more volatile costs of food and energy — to reach 2.5% by the end of 2026. Headline inflation, which includes all categories, was expected to reach 2.4% by the end of this year.
Economic growth forecasts also rose for 2026, with GDP now expected to grow 2.4% this year, up from a forecast for 2.3% growth as of December.
Notably, Fed officials don’t foresee considerable further weakening in the labor market, with the unemployment expected to remain at 4.4% at the end of this year.