Fed forecasts see latest hike followed by another before end of year

Wednesday's rate hike came as policymakers have been wrestling with inflation that has remained stubbornly high. Since the June meeting the issue has only gotten more challenging as price pressures, fueled in part by surging energy costs related to the Middle East war, have risen and increased worries that inflation will not moderate to the Fed’s 2% target in a timely fashion.

Officials marked up their long-run expectation of a federal funds rate to 3.2% from the June forecast of 3.1%.

The Fed’s forecasts also showed policymakers now expecting generally higher inflation for this year and beyond.

For 2026, the median forecast for inflation as measured by the personal consumption expenditures price index stood at 3.7%, versus the June projection of 3.6%. Officials still expect the PCE price index to stand at 2.3% next, with 2028 coming in at 2.1%, from June's forecast of 2%. Officials expect to get back to their 2% inflation target in 2029.