Fed Raises Rates Again, Warns of More to Come

The Federal Reserve raised its target range for the federal funds rate by 25 basis points to 3.75%, 4.00%, marking the first increase in more than three years under Fed Chair Kevin Warsh.

The decision was unanimous, with all 12 voting members supporting the increase.

While the rate hike itself was anticipated, the Fed's updated economic projections and comments from Warsh on inflation and monetary policy were seen as significant signals for markets.

Inflation remains above the Fed's 2% target, with recent data showing price pressures have not cooled quickly enough. The median forecast for 2026 PCE inflation was raised to 3.7%, while core PCE inflation was projected at 3.4%. Warsh emphasized that inflation remains too high and the underlying trend has not improved meaningfully.

The Fed's projected path suggests a 4.1% median federal funds rate for the end of 2026, consistent with another 25bp increase before year-end.