Editor’s Note: Article has been updated with additional information.
The Federal Reserve held interest rates unchanged at 3.50%–3.75% for the third straight meeting on Wednesday, as widely expected by market participants.
The FOMC statement noted that while economic activity has been expanding at a solid pace, job gains have remained low, and inflation remains somewhat elevated.
Fed Governor Stephen Miran was the lone dissenter, voting in favor of a 25-basis-point rate cut.
The updated Summary of Economic Projections (SEP) pointed to higher inflation and slightly higher economic growth compared to December.
- The Fed now sees PCE inflation at 2.7% in 2026, up from 2.4% projected in December.
- Real GDP growth is now projected at 2.4% for 2026, up from 2.3% in December.
| 2026 | 2027 | 2028 | |
|---|---|---|---|
| Change in real GDP (%) | 2.4 | 2.3 | 2.1 |
| December projection (%) | 2.3 | 2.0 | 1.9 |
| Unemployment rate (%) | 4.4 | 4.3 | 4.2 |
| December projection (%) | 4.4 | 4.2 | 4.2 |
| PCE inflation (%) | 2.7 | 2.2 | 2.0 |
| December projection (%) | 2.4 | 2.1 | 2.0 |
| Core PCE inflation (%) | 2.7 | 2.2 | 2.0 |
| December projection (%) | 2.5 | 2.1 | 2.0 |
The dot plot — the chart showing where each Fed official expects interest rates to be in the coming years — showed the median federal funds rate at 3.4% by the end of 2026, unchanged from December 2025, signaling that policymakers still see room for an additional 25-basis-point cut.
Another rate cut is pencilled in for 2027, unchanged from December.
| Federal funds rate (%) | 3.4 | 3.1 | 3.1 |
| December projection (%) | 3.4 | 3.1 | 3.1 |
Market Reactions
Markets showed a muted reaction to the Fed decision, with equities barely moving from midday levels and oil prices giving back some gains. Gold bounced as the no-change outcome on the rate path reduced pressure from dollar strength.
- S&P 500 – as tracked by the SPDR S&P 500 ETF Trust (NYSE:SPY) – slipped to 6,681, extending losses to 0.7% on the day
- Nasdaq 100 – as tracked by the Invesco QQQ Trust (NASDAQ:QQQ) – edged down to 24,660 points, now 0.5% lower on the day
- Dow Jones held near flat at 46,587, down 0.9%.
- WTI crude – as tracked by the United States Oil Fund (NYSE:USO) – pulled back to $96.53, trimming gains to 0.3% on the day.
- Gold bounced to $4,887 from $4,863 at midday, paring its daily loss.
Fed Chair Jerome Powell is due to speak at 2:30 p.m. ET. Traders will closely watch his remarks for any guidance on how the oil price spike — with Brent crude surging past $108 amid strikes at Iranian energy facilities — could delay the Fed’s easing path.
Watch Powell’s press conference below:
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