Fed delivers third straight rate cut but dot plot projects just one cut in 2026

Core Viewpoint - The Federal Reserve has cut interest rates for the third consecutive meeting, indicating a potential for only one additional cut next year as rates approach a neutral level [1][4]. Interest Rate Cuts - The Fed lowered the benchmark federal funds rate by 25 basis points to a range of 3.5% to 3.75% [1]. - The median projection for the federal funds rate is now in the range of 3.25% to 3.5%, suggesting only one rate cut next year and another in 2027 [2]. Inflation and Economic Projections - Inflation remains elevated at approximately 3%, significantly above the Fed's target of 2%, which has delayed earlier rate cuts [3]. - The Fed's dot plot indicates a gradual decline in inflation, projecting the personal consumption expenditures (PCE) inflation index to decrease from 2.9% at the end of 2025 to 2.1% by 2027 [6]. - The unemployment rate is expected to decline slightly, with projections of 4.4% next year and 4.2% in 2027 [7]. Federal Reserve's Position - Federal Reserve Chair Jerome Powell stated that the current funds rate is within a broad range of its neutral value, allowing the Fed to monitor economic developments [8]. - Powell emphasized the Fed's commitment to achieving a 2% inflation target while navigating challenges in the labor market and tariff impacts on inflation [9][10]. - The Fed's monetary policy is not on a fixed path, and adjustments will be made based on incoming economic data [11].