FOMC SUMMARY: Fed hikes as expected in unanimous decision; dot plot sees one more hike this year
An as-expected 25bp hike with a unanimous vote rarely re-prices anything on its own; in episodes of this kind the market action has centred on the dots and the statement edits, and here both lean hawkish.
Fed Chair Warsh highlights the strength of the US labour market
Fed Chair Warsh says decision comes when the economy appears to be strengthening and is pointing in a good direction
FOMC SUMMARY: Fed hikes as expected in unanimous decision; dot plot sees one more hike this year
FOMC Summary of Economic Projections: Only 18 of 19 members submitted forecasts (expectations were for Warsh to not submit forecasts)
FOMC STATEMENT COMPARE:
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FOMC: The Fed hiked rates by 25bps as expected, taking the target range for the federal funds rate to 3.75-4.00%, with the decision unanimous. The statement saw only minor changes, with the Fed saying the rate hike would help return inflation to target in a more timely manner, while reiterating its commitment to price stability. The Fed maintained that inflation remains elevated, although it dropped the previous language attributing this in part to supply shocks.
On activity, the Fed maintained that the economy is expanding at a solid pace, while adding that domestic spending has remained resilient despite uncertainty stemming in part from geopolitical developments. It maintained that productivity growth is strong, while describing capital investment as "robust", versus "strong" previously. Labour market language was broadly unchanged, with the Fed reiterating that job gains have kept pace with growth in the workforce and the unemployment rate has changed little.
DOT PLOT/SEP: Regarding the dot plot, Warsh did not submit forecasts again, with 18 participants submitting projections. The dots were hawkish, with the median seeing another 25bp hike in 2026. Twelve participants pencilled in one further hike this year, four saw two additional hikes, while just two saw no further hikes. The median remains at 4.125% through end-2027, implying one further hike this year followed by rates remaining on hold throughout 2027, before easing to 3.875% in 2028 and 3.625% in 2029. The longer-run rate was lifted to 3.2% from 3.1%. Growth forecasts were raised by 0.1ppts in both 2026 and 2027, while 2028 and the longer-run projections were maintained. Unemployment projections were lowered to 4.1% across 2026-28, while the longer-run rate was maintained at 4.2%. Both headline and core PCE inflation projections were raised for 2026 and 2028, while the 2027 projections were maintained.
A median pointing to one further hike, with the distribution skewed toward more rather than fewer, is the kind of signal that has historically moved the front end and supported the dollar, while the upward revision to the longer-run rate matters more for the back of the curve than the near-term path does. The dropped supply-shock language on inflation is a meaningful tell: it reframes the inflation problem as demand-driven, which in past cycles has implied a higher bar for pausing than a supply-attributed overshoot. Two participants not submitting forecasts, including a named dissenter from the projection process, is worth noting as an institutional wrinkle rather than a policy signal. The follow-ons that have mattered in comparable meetings are the press conference tone on how close the committee judges itself to done, and whether subsequent speakers coalesce around the median or the hawkish tail. With growth revised up and unemployment revised down alongside firmer inflation projections, the statement's own logic points to the next labour and PCE prints carrying outsized weight for whether the pencilled-in final hike materialises.
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