Fed Reserve expects one rate cut in 2026

Federal Reserve headquarters

A report by the US Federal Reserve revealed the economic projections of Federal Open Market Committee (FOMC) members and regional Fed presidents, showing that they maintained their outlook for just one reduction in interest rate, of 25 basis points, in 2026 and 2027.

The report, released on Dec. 10 following the committee’s meeting, also indicated that policymakers raised their forecasts for economic growth for this year and for the following two years.

The move came after the Federal Reserve cut its benchmark interest rates today for the third time in 2025, by 25 basis points, bringing the range to 3.50%-3.75%.

Committee members kept their projections for the unemployment rate unchanged for both the current year and next year, while lowering their estimate for 2027.

Regarding inflation, policymakers trimmed their forecasts for the annual pace of the personal consumption expenditures (PCE) price index, as well as the core index, which excludes food and energy prices, for 2025 and 2026.  

These forecasts reflect policymakers’ expectations for year-over-year changes in key economic indicators between Q4 of the reference year and Q4 of the prior year.

The US unemployment rate rose to 4.4% in September, while the PCE inflation and the core PCE stood at 2.8% each.