The Federal Reserve’s September projections put the median federal funds rate at 4.1% at the end of 2026 and again at the end of 2027. That is three-eighths of a point higher for 2026 than in June and half a point higher for 2027. In plain terms, the median official now expects one more quarter-point hike this year and no cuts next year.
That shift matters because it reverses the direction of travel. In June, the same chart showed rates drifting down to 3.6% by the end of 2027. The September version arrived alongside the first rate increase since 2023, and Governor Christopher Waller argued on Oct. 8 that it is doing real work as a signal to markets. Here is how to read it, and what it does not commit anyone to.
1. What the dot plot is
Four times a year the Fed publishes a Summary of Economic Projections. Each participant at the meeting, the seven governors and the 12 Reserve Bank presidents when all seats are filled, submits a forecast for growth, unemployment and inflation, plus the interest rate path he or she considers appropriate. In September, 18 participants sent projections.
The rate projections are plotted as dots, one per participant, for each year-end and for the longer run. The published number is the median. It is not a committee decision, nobody votes on it, and each participant’s forecast assumes his or her own preferred policy, not the committee’s.
Each participant’s projections are based on his or her assessment of appropriate monetary policy.
EXCERPT · Summary of Economic Projections, Table 1 notes, Sept. 16, 2026
2. What changed between June and September
| Median projection | 2026 (Sept.) | 2026 (June) | 2027 (Sept.) | 2027 (June) | Longer run (Sept.) |
|---|---|---|---|---|---|
| Federal funds rate | 4.1 | 3.8 | 4.1 | 3.6 | 3.2 |
| PCE inflation | 3.7 | 3.6 | 2.3 | 2.3 | 2.0 |
| Core PCE inflation | 3.4 | 3.3 | 2.5 | 2.5 | n/a |
| Unemployment rate | 4.1 | 4.3 | 4.1 | 4.3 | 4.2 |
| Real GDP growth | 2.3 | 2.2 | 2.4 | 2.3 | 2.0 |
Officials raised their inflation forecasts slightly, lowered their unemployment forecasts and nudged up growth. The longer-run rate, the closest thing to a collective estimate of neutral, rose from 3.1% to 3.2%. Two points stand out in the risk assessments that accompany the table. Seventeen of 18 participants said the risks to their headline inflation forecast were weighted to the upside. On unemployment, 17 now see the risks as broadly balanced, compared with 10 in June, when seven saw risks tilted toward higher joblessness.
The 3.4% core PCE projection for 2026 partly reflects measurement. The September minutes noted that software and portfolio management fees had made “relatively large contributions” to recent PCE readings and that BEA’s methodology changes would likely shrink them. When BEA published August data under the new method on Sept. 30, core PCE inflation came in at 3.0% over 12 months.
3. The distribution is the story
The median hides the spread. For the end of 2026, 12 participants put the midpoint at 4.125%, four at 4.375% and two at 3.875%. In his Oct. 8 speech, Waller spelled out the arithmetic: “Sixteen of the 18 participants who submitted dots anticipated at least one more hike during the two remaining meetings this year. Four of those 16 expected two additional hikes.”
For 2027 the picture is more scattered. Waller noted that eight participants expect rates to end 2027 half a point above today’s level, while others may have hikes early in the year and cuts later. A median of 4.1% for both years can conceal very different paths.
A dot is a forecast with a policy assumption attached, not a promise with a vote behind it.
4. What the dots do not promise
They do not set a date. The minutes say most participants saw another increase as “likely” to be appropriate “by year end,” and Waller added that hikes “do not need to come at consecutive meetings.” October and December are both live under that wording.
They are also a snapshot. The projections were submitted before September’s jobs report, which showed payrolls up just 29,000. Participants can revise their views at any meeting, but the next published dots arrive only on Dec. 9. And the median can move without any single official changing his or her mind, if the composition of the committee changes.
Track record argues for humility. The fan charts in the same release, built from historical forecast errors, put the 70% confidence band for 2026 unemployment at 3.6% to 4.6%. Waller made the case for the dots as a communication tool: without them, he said, markets “could price in zero or even potentially five hikes.”
5. What happens next
- Oct. 28: FOMC decision, no new projections.
- Nov. 18 (expected): minutes of the October meeting, the next read on how many officials still favor a 2026 hike.
- Dec. 9: the next Summary of Economic Projections, which will add a fresh year-end 2027 view and show whether the 4.1% median held.
- Summary of Economic Projections, Sept. 16, 2026 — Federal Reserve Board · federalreserve.gov
- Minutes of the FOMC, Sept. 15–16, 2026 — Federal Reserve Board · federalreserve.gov
- The Signaling Value of the Summary of Economic Projections (Waller, Oct. 8, 2026) — Federal Reserve Board · federalreserve.gov
- Meeting calendars and information — Federal Reserve Board · federalreserve.gov
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