The Federal Open Market Committee raised the target range for the federal funds rate by 25 basis points to between 3.75% and 4% on Wednesday, marking the first increase in more than three years, while updated projections signaled another hike remains likely before year-end. Policymakers’ median forecast for the federal funds rate reached 4.1% for the end of 2026, corresponding to a target range of 4% to 4.25%, according to the projections released after the meeting. Twelve of the 18 officials who submitted projections anticipated the rate would reach 4.125% by year’s end, while four projected 4.375% and two saw no additional moves beyond Wednesday’s action.

Hawkish shift from June

The outlook represented a markedly more hawkish stance than the Fed’s June projections, which had pointed to a median policy rate of 3.8% by year-end. Fed-funds futures were pricing in roughly 1.9 quarter-point increases during 2026 in total prior to the announcement, suggesting traders had already anticipated nearly one additional hike. The projections showed the median policy rate remaining at 4.1% in 2027 before declining to 3.9% in 2028 and 3.6% in 2029, with the longer-run estimate rising slightly to 3.2% from 3.1%. The Federal Reserve said inflation remained elevated and noted that Wednesday’s increase would support a “timelier return” to its 2% target.