Fed Officials Project Higher Rates, Steady Jobless Rate
The Federal Reserve's latest economic projections show a higher path for interest rates and a stable unemployment rate through the end of the decade, with
Federal Reserve officials project the benchmark interest rate will be higher than previously expected while the unemployment rate holds steady, according to the central bank's Summary of Economic Projections (SEP) from September 2026. The median forecast sees the federal funds rate at 4.1% at the end of 2026 and 2027, before declining to 3.9% by the close of 2028 and 3.6% by the end of 2029.
These interest rate projections are notably higher than the ones made in June. The St. Louis Fed's FRED Blog analysis shows the median projection increased by 0.3 percentage points for 2026 and by 0.5 percentage points for both 2027 and 2028. The projections represent the views of individual Federal Open Market Committee (FOMC) participants and are not an official committee plan.
Unemployment and Inflation Outlook
The median FOMC participant expects the unemployment rate to average 4.1% in the fourth quarter of 2026 and remain at that level through 2029. This forecast is slightly below the median projection from June.
For core inflation, measured by the personal consumption expenditures (PCE) price index excluding food and energy, the median projection is 3.4% for 2026. Officials anticipate a return to the Fed's long-run inflation target of 2% by 2029.
Growth Projections Revised Upward
Forecasts for economic growth were revised upward for the near term. The median projection for real GDP growth in 2026 was raised to 2.3% from 2.2% in June, though it remains below the 2.4% forecast made last March.
The outlook for 2027 also improved, with growth projected at 2.4%, up from 2.3% in the previous two forecasts. Looking further ahead, the Committee sees growth gradually converging toward its longer-run trend of 2.0%.
| Year | Real GDP Growth (Median Projection) |
|---|---|
| 2026 | 2.3% |
| 2027 | 2.4% |
| 2028 | 2.2% |
| 2029 | 2.1% |
Interest Rate Path and Dispersion
The projected path for the federal funds rate shows a gradual decline from its elevated level. The FRED Blog notes that the SEP for December 2025 was identical to the one from September 2025, which is why that earlier vintage appears in the comparative chart.
Focusing solely on the median rate can mask the range of views among policymakers. For instance, individual projections for where the policy rate will be at the end of 2029 vary widely, from a low of 2.9% to a high of 3.9%. This September's report is the first to include projections for 2029, as the FOMC extends its forecast horizon each September.
