Fed hikes rates to 3.75%-4% amid inflation concerns

Key facts

• The Federal Reserve raised its benchmark interest rate to a target range of 3.75% to 4%.
• Fed officials expect one more rate hike this year.
• Policymakers marked up their inflation outlook for this year and beyond.
• GDP growth this year is seen at 2.3%, up from June’s 2.2% forecast.
• The unemployment rate is seen at 4.1% by the end of this year, staying there through 2029.

Federal Reserve officials expect one more interest rate increase this year after raising rates on Wednesday and expect to hold steady in 2027, quarterly projections released after their latest policy meeting showed. Policymakers also marked up their near-term inflation outlook. The forecasts were released as policymakers raised the target rate for fed funds by a quarter percentage point to 3.75-4.00%, which was widely expected. Their new forecasts see rates coming back down in 2028 and for the federal funds rate to stand at between 3.5% and 3.75% in 2029. In June, Fed officials in their projections had penciled in one quarter point rate rise this year and a cut of the same amount in 2027. Wednesday's rate hike came as policymakers have been wrestling with inflation that has remained stubbornly high. Since the June meeting the issue has only gotten more challenging as price pressures, fueled in part by surging energy costs related to the Middle East war, have risen and increased worries that inflation will not moderate to the Fed’s 2% target in a timely fashion. Officials marked up their long-run expectation of a federal funds rate to 3.2% from the June forecast of 3.1%. The Fed’s for