FOMC Decision and Macroeconomic Forecasts
- Interest rates: The 25 bps rate hike (to 3.75%–4.00%) was unanimous (12–0). This is the first hike in three years.
- Dot plot (Dot Plot 2026): The median is 4.1%. As many as 12 out of 18 officials project one more rate hike this year, 4 favor two, and only 2 see no need for further moves. Warsh did not submit his forecast.
- Path for 2027–2028: The expected rate path was raised by 50 bps: to 4.1% in 2027 and 3.9% in 2028, respectively.
- GDP and unemployment: The GDP growth forecast for 2026 was raised to 2.3%, and the expected unemployment rate was lowered to 4.1%.
- PCE Inflation: Expectations were raised to 3.7%, removing references attributing inflation to supply-side factors from the statement.
Key Statements by Kevin Warsh
- Warsh noted that he is far from calling financial conditions restrictive, a view widely shared across the FOMC. He also noted that he did not submit his own dot in the dot plot.
- The Fed chair emphasized that inflation is too high and has been for too long, with summer data showing no improvement. Too many categories are recording price increases above 3% (on a 6- and 12-month basis).
- The economy is clearly strengthening and remains resilient. The labor market is in good shape, unemployment remains low, and the number of job openings and working hours is growing.
- The main goal of the Fed remains price stability. The Committee needs confidence that core inflation is moving toward 2% in a timely manner, which has not yet been met.
Market Reaction
- EURUSD: The strengthening of the dollar triggered a sharp drop in the pair, breaking support and pushing the rate below 1.1500.
EURUSD is at its lowest level since late July, weakening by 0.5%. Source: XTB
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