The Federal Reserve voted unanimously to maintain interest rates at 3.50% to 3.75%, marking the fourth consecutive meeting without adjustment. However, updated economic projections signal a significant policy shift. The Fed raised its 2026 PCE inflation forecast from 2.7% to 3.6%, citing persistent energy price pressures driven by Middle East geopolitical tensions.
This session marked Kevin Warsh’s first FOMC meeting as Chair, replacing Jerome Powell who now serves as governor. The post-meeting statement notably removed previous language suggesting near-term rate cuts. Among the 19 voting officials, nine now project at least one rate hike before year-end, with six expecting two or more increases. This represents a sharp reversal from market expectations formed during late 2025 easing cycles.
Financial markets reacted swiftly to the hawkish pivot. Equities sold off as higher borrowing cost prospects weighed on valuations, while bonds repriced to reflect potential upward rate movement. The dollar strengthened and gold shifted as investors recalibrated risk positioning. Economists broadly expect the federal funds rate to remain in its current range through 2026 as policymakers navigate renewed inflationary headwinds.