Federal Reserve Projects Single 2026 Reduction
(MENAFN) The U.S. Federal Reserve’s latest projections reveal a more cautious outlook on interest rate cuts, forecasting just one reduction in 2026—fewer than market expectations, according to the central bank’s median estimates released Wednesday.
The Fed’s "dot plot," which anonymously reflects the views of 19 policymakers, indicates a median federal funds rate of 3.4% at the close of 2026. This figure aligns closely with a consensus estimate of 3.6% for year-end 2025, which assumes two rate cuts following Wednesday’s 25 basis-point reduction.
Market participants had priced in two to three rate cuts next year, signaling a more aggressive easing pace than the Fed’s median projection suggests.
Wednesday’s decision saw the Federal Reserve lower its benchmark federal funds rate by 25 basis points to a 4.00%-4.25% target range, marking the first rate cut in 2024 after five consecutive meetings of rate stability.
The Fed highlighted its careful monitoring of risks affecting both aspects of its dual mandate, observing an increase in downside risks to employment.
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