As widely expected, the Federal Open Market Committee left the federal funds target range unchanged at 3.50%–3.75%. Key takeaways from the meeting are outlined below:
Statement
The official statement was largely unchanged but acknowledged rising geopolitical risks, noting that “the implications of developments in the Middle East for the U.S. economy are uncertain.”
Governor Stephen Miran dissented, voting in favor of a 25 basis point rate cut.
Summary of Economic Projections
The Fed raised its 2026 inflation forecast to 2.7% and notably revised its 2026 GDP projection higher to 2.4%, suggesting policymakers do not yet see elevated inflation materially weighing on growth (see chart below).
The expected policy path was unchanged, with the median forecast still pointing to one 25 basis point rate cut in both 2026 and 2027.
Powell’s Press Conference
Chair Powell characterized the economy as expanding at a solid pace while reiterating that the economic implications of the Middle East conflict remains uncertain.
On inflation, Powell emphasized that further progress is required before considering rate cuts, signaling a continued data-dependent approach.
Powell also stated his intention to remain at the Fed until the Department of Justice investigation is fully resolved, saying “I have no intention of leaving the board until the investigation is well and truly over, with transparency and finality.”
Market Reaction
Treasury yields moved higher across the curve, led by the 2-year, which rose over 9 basis points to 3.77%.
Fed funds futures have since repriced, with markets now assigning about a 50/50 chance of a cut in 2026.
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