Fed Meeting Live Updates: Expected Third Rate Cut and New 2026 Forecasts

During the Q&A, Powell was asked whether the Fed’s latest projections imply that rate cuts are essentially on pause. He said that view is reasonable, indicating that policy is now close to a “neutral” level — a rate that neither pushes the economy forward nor slows it to curb inflation.

Because the exact neutral level isn’t known, the Fed avoids declaring a precise figure. But Powell’s comment that the benchmark rate is near that zone suggests he does not expect to continue the recent pace of cuts.

In his prepared remarks, Jerome Powell said the Fed expects inflation to finish this year at 2.9%, easing to 2.4% by the end of 2026. He also noted that the outlook for economic growth has improved, with the committee now projecting 2.3%GDP growth next year — slightly higher than earlier forecasts for that period.

Powell acknowledged that hiring has slowed and suggested that reduced immigration may be part of the reason. He also cited the committee’s median expectations for the policy rate: 3.4% at the end of 2026 and 3.1% at the end of 2027.

These projections indicate only small reductions from today’s 3.5%–3.75% range, signaling that the Fed does not anticipate a steep path of cuts from this point forward.

Jerome Powell said the Fed has seen money-market rates tighten relative to the central bank’s own benchmark rates, a sign that bank reserves have dropped more than policymakers want.

Because of that, the Fed will begin buying short-term Treasury bills again. The plan starts with $40 billion in purchases during the first month, and Powell said the totals could stay high for several months while the committee works to rebuild reserves.

The Fed’s latest Summary of Economic Projections keeps its interest-rate outlook the same as in September. The dot plot still points to one rate cut in 2026 and two in 2027.

Growth expectations inched higher. Officials now see GDP expanding 1.7% in 2025 and 2.3% in 2026, both slightly above their earlier estimates.

Inflation projections moved lower. The committee expects PCE inflation to close out 2025 at 2.9% (down from 3.0%) and end 2026 at 2.4% (previously 2.6%).

Unemployment forecasts did not change, holding at 4.5% for 2025 and 4.4% for 2026.

The Fed made several revisions to its policy statement released this afternoon. Here are the main changes:

Labor market wording updated

The statement now notes that job growth has slowed this year and that the unemployment rate has risen through September, with recent data backing that trend. The prior version referenced conditions only through August and emphasized that unemployment had “remained low.

New phrasing around future rate moves

The committee added language saying it will weigh the extent and timing of any further adjustments to the federal funds rate. Previously, the statement only referenced “additional adjustments,” without addressing timing.

Shift in balance-sheet guidance

The Fed now says reserve levels have dropped to “ample” and that it will purchase short-term Treasuries as needed to keep reserves at that level. The earlier statement said the reduction of the Fed’s securities holdings would end on December 1.

Today’s Fed decision did not receive unanimous support. Three FOMC members broke with the majority:

• Stephen Miran favored a half-point reduction instead of a quarter-point cut.
• Jeffrey Schmid backed no change in rates.
• Austan Goolsbee also supported holding steady.

The split highlights the internal tension over how far to push policy easing. A divided vote increases the possibility that the Fed may slow or pause further cuts in the near term.