September 2026: What the Federal Reserve Thinks About the Broader Economy

Here is a graph courtesy of the Financial Times that shows what the member of the Federal Reserve who vote on interest rates think about the broader economy.

A few things stand out:

• Most officials cluster around the 4% range for 2026 and 2027. This means that there is broad consensus that rates will not fall quickly and it is the Fed’s way of quietly signaling that the era of 0 to 2% rates is over.

• The longer-run dots are creeping upward, sitting mostly above 3%. This implies that the Fed believes the economy can sustain higher rates without a recession.

• Core PCE inflation expectations for 2026 have risen, which means that Fed officials believe inflation will be more persistent than previously thought. The Fed here is signaling to expect a slower return to their prefer target of 2%. The 2027 inflation line is flatter, meaning that Fed officials think inflation will eventually ease, but gradually.

• The GDP line shows that Fed officials believe growth is expected to be modest, but stable. And the unemployment line staying near 4% tells us that the Fed thinks that the labor market will remain tight.

Putting this all together, the charts show that Fed officials expect interest rates to stay higher for longer, inflation to be stickier than previously assumed, GDP growth to remain modest, and unemployment to stay low. The combination signals a central bank that sees persistent inflation pressures and no imminent recession, which is why the rate path is flatter (i.e., no sharp cuts expected) and elevated (the longer‑run neutral rate drifting above its historical 2–2.5% range).