Fed’s revised projections show a median 2026 rate of 3.8%, up from 3.4%, signaling potential hikes ahead and lifting USD.
The Federal Reserve held rates at 3.50% to 3.75% but removed its easing bias, replacing it with a commitment to price stability. The unanimous 12-0 vote marked a shift from April’s 8-4 split, reflecting a more hawkish stance under Chair Kevin Warsh.
The Summary of Economic Projections (SEP) revealed a sharp upward revision in the 2026 federal funds rate to 3.8%, up from 3.4% in March. Inflation forecasts also surged, with 2026 PCE rising to 3.6% from 2.7% and core PCE to 3.3%, despite easing oil prices.
EUR/USD fell nearly 60 pips within minutes, breaking below 1.1550 and approaching 1.1500 as markets digested the Fed’s pivot.