Fed 2026 Rate Hike Expectations Rise; Warsh Abstention Draws Attention

The Fed's latest economic projections suggest a possible rate hike in 2026, but the outlook is made more uncertain by the fact that new Chair Kevin Warsh did not submit his own projection.

Among 18 officials, 9 project the federal funds rate will be above the current 3.5% to 3.75% range by end-2026. However, Warsh's individual judgment appears missing from the latest projections, and he confirmed at the press conference that he did not provide a forecast.

Currently, the median rate projection shows the federal funds rate at 3.8% by end-2026. That level is higher than the 3.4% given in the Fed's March Summary of Economic Projections, and 0.25 percentage points above the current target range.

Warsh, who just took over as Fed chair, has signaled his desire to reform the central bank's communication approach. He believes officials may have provided too much forward guidance and devoted too much effort to planning the future monetary policy path.

Meanwhile, the Fed's policy statement also underwent a significant rewrite. Unlike recent years when only a few words were typically changed, Wednesday's statement was notably shortened in length.