FOMC decision
Actual: 25bp hike to 3.75-4%
Vote: 12-0, unanimous
Confirms the scenario already flagged in the prior analysis (87% hike odds ahead of the meeting)
GDP growth (SEP, median)
2026: 2.3% (June previous: 2.2%)
2027: 2.4%
2028: 2.2%
2029: 2.1%
Longer run: 2.0%
Unemployment rate (SEP, median)
2026: 4.1% (June previous: 4.3%)
2027: 4.1%
2028: 4.1%
2029: 4.1%
Longer run: 4.2%
PCE inflation (SEP, median)
2026: 3.7% (June previous: 3.6%), sharp upward revision
2027: 2.3%
2028: 2.1%
2029: 2.0%
Core PCE (SEP, median)
2026: 3.4% (June previous: 3.3%)
2027: 2.5%
2028: 2.2%
2029: 2.0%
Projected fed funds rate (SEP, median)
2026: 4.1% (June previous: 3.8%)
2027: 4.1% (June previous: 3.6%)
2028: 3.9% (June previous: 3.4%)
2029: 3.6%
Longer run: 3.2% (June previous: 3.1%)
The real signal, broad hawkish revision across the whole curve
The most striking revision concerns 2027, the median fed funds rate jumps from 3.6% to 4.1%, or 50bp of additional tightening anticipated versus June
This revision extends to 2028 (3.4% to 3.9%) and even the longer-run rate (3.1% to 3.2%)
2026 unemployment revised down (4.3% to 4.1%) confirms the Fed now sees a more resilient economy than anticipated in June, consistent with the mixed but not sharply deteriorating employment data documented this week
Full consistency with this series' narrative
This hike and these revisions directly confirm the weekly repricing analysis showing the Fed with the sharpest move (50bp expected by year-end) after core CPI surprised to the upside
The statement explicitly cites "geopolitical developments" as a factor, consistent with the above-$100 oil narrative documented throughout this series
2026 inflation revised to 3.7% (PCE) confirms the Fed now factors in more persistent inflationary pressure than expected in June
The key point, risks now skewed to the upside for inflation
The distribution charts show nearly all participants judge uncertainty about PCE and core PCE inflation "higher" than historical norms
Risks judged "weighted to the upside" by the large majority of participants for inflation, versus "broadly balanced" for growth and unemployment
A clear signal, the committee collectively recognizes the dominant risk is now inflation running hot, not an activity slowdown
Dispersion of views (dot plot)
For 2026, most projections cluster between 4.13% and 4.37%, with a more dovish minority around 3.88-4.12%
For the longer run, wider dispersion between 2.88% and 3.87%, reflecting persistent disagreement on the neutral rate
Implications
DXY: bullish bias confirmed and reinforced, this decision and these projections fully validate the Warsh camp identified in this series' prior analyses over the Waller camp
The upward revision to the 2027 terminal rate (4.1% versus 3.6% anticipated in June) is the most important signal for FX markets, a longer and deeper tightening cycle than expected
EUR/USD, GBP/USD: likely downward pressure, the rate gap with the ECB (37bp expected by year-end) and the BoE (51bp) remains clearly in the dollar's favor
Consistent with the broad-based central bank repricing documented previously, but the Fed shows the sharpest relative move in the group
Point of caution
The unanimous vote (12-0) masks real dispersion in individual rate projections (dot plot), with some participants still on a notably softer path
The confirmation that inflation risks are seen as skewed to the upside by nearly the whole committee is a strong signal of collective resolve, but the trajectory beyond 2026 remains highly sensitive to how the Middle East conflict and oil prices evolve, now explicitly acknowledged as a source of uncertainty by the Fed itself