The Fed just raised its key rate by 25 basis points in a unanimous 12–0 vote. The central bank also said it could ramp up its Treasury holdings (QE) if needed, specifically buying government bonds with maturities up to three years to keep reserves at healthy levels. According to the Fed, economic activity is still running strong, domestic spending is solid despite global uncertainty, productivity growth is robust, and capital investment is high. Job gains are keeping pace with labor force growth, and unemployment is basically unchanged. Inflation is still running hot; today’s move is meant to help speed up the return to the 2% target.

Rate Outlook and Path Ahead

Sixteen Fed officials expect at least one more hike in 2026. The median year-end rate forecast is now up to 4.125%, compared to 3.75% back in June. Here’s the breakdown: 12 out of 18 members see one more 25bps hike this year, four expect two hikes, and two don’t see any further moves. The updated path points to 4.125% in 2027, 3.875% in 2028, 3.625% in 2029, and 3.25% for the long run.

Economic and Inflation Snapshot

The Fed sees steady economic growth with solid domestic spending. The labor market is balanced: hiring is matching labor force growth, and unemployment isn’t really budging. But inflation is still above target—hence the latest tightening.

2026 Macro Forecasts

The US GDP growth forecast is up to 2.3% from 2.2% in June; unemployment is now expected at 4.1%, down from 4.3%. The 2026 PCE inflation forecast is bumped to 3.7% from 3.6%, and core PCE is now seen at 3.4%, up from 3.3%.