Federal Reserve raises 2023 rate outlook to 3.8% and lifts 2026 inflation forecast to 3.6%, signaling prolonged tightening.
The Federal Reserve revised its federal funds rate projection to 3.8% for 2023, up from March’s 3.4% forecast, as inflation remains elevated. The updated outlook reflects a quarter-point hike expected by September, per CME futures data.
Inflation expectations for 2026 were also raised to 3.6% from 2.7%, underscoring persistent price pressures. Despite this, economic activity continues at a solid pace, with strong job gains and productivity growth.
Markets have adjusted to the Fed’s hawkish stance, pricing in the higher rate trajectory as inflation concerns outweigh near-term growth resilience.