On Wednesday the Federal Reserve maintained its projection of a single rate cut in 2026, consistent with the outlook set three months ago. According to the dot plot released after the Federal Open Market Committee (FOMC) meeting, the median policy rate is expected at 3.4% at the end of 2026, a quarter-point below its current range of 3.5% to 3.75%. This estimate comes as the Fed carried out a third 25bp reduction in 2025, confirming the anchoring of a cautious easing cycle.
However, the decision highlighted widening internal rifts within the FOMC. Three dissents were recorded: Stephen Miran argued for a more aggressive 50bp cut, while Jeffrey Schmid and Austan Goolsbee preferred to leave rates unchanged. Adding to these discordant voices are four other nonvoting members expressing implicit reservations, and seven officials who foresee no additional cuts in 2026. These divergences reflect a difficult balance between fighting inflation and supporting growth.
For 2027, the committee anticipates an additional cut, with a terminal rate projected at 3.1%, before stability expected in 2028. These projections reinforce the idea of a very gradual normalization of monetary policy in an uncertain economic environment. Amid moderate growth, persistent inflation, and political uncertainties ahead of a change at the helm of the Fed, the institution remains cautious, avoiding any signal of a rapid loosening.
