Federal Reserve Hikes Rates by 25 Basis Points, Projects One Additional Increase in 2026
The Federal Reserve raised interest rates by a quarter-point to a range of 3.75%-4%, marking its first increase since early 2023 and aligning with market expectations. The central bank now projects one more rate hike before the end of 2026, as 16 out of 18 policymakers anticipate further tightening this year. Inflation forecasts for 2026 were raised to 3.7%, while GDP growth was slightly increased and unemployment lowered in updated projections. Markets reacted calmly despite JPMorgan's warning that higher-for-longer rates could pressure equities. The S&P 500 rose by 0.4% post-decision, with the Nasdaq gaining more than twice as much. Treasury yields also declined slightly following the announcement. Prediction markets on Polymarket suggest a likely pause in October followed by another rate hike later this year. The Fed's decision and outlook were accompanied by changes to its inflation narrative, removing references to supply shocks that had previously explained price pressures.
Topics: Fed policy GDP growth inflation forecast interest rates