Fed’s updated projections show a 2026 rate hike bias, reversing earlier cuts, as inflation forecasts surge to 3.6% PCE.
The Federal Reserve held rates at 3.50%-3.75% but removed its easing bias and signaled a hawkish pivot. The FOMC’s unanimous vote contrasted with April’s 8-4 split, while the 2026 median rate projection rose to 3.8% from 3.4%, indicating potential hikes ahead.
Inflation forecasts drove the shift, with 2026 PCE jumping to 3.6% from 2.7% and core PCE to 3.3%. The Fed’s statement emphasized restoring price stability, abandoning prior language on timing adjustments.
EUR/USD fell nearly 50 pips to 1.1550, its lowest level of the session. The pair remains bearish below 1.1550, with 1.1500 as the next target, while a rebound above 1.1600 could signal a fade.