Fed Rate Decision Highlights: Growing Divergence on Rate Outlook, Statement Wording Changes

Here are the highlights of the Fed's rate decision on Wednesday:

The Federal Open Market Committee voted unanimously to maintain the target range for the federal funds rate at 3.5% to 3.75%.

The 'dot plot' reflecting rate projections showed divergence among officials on whether to raise rates by end-2026, with 9 of 18 officials expecting a rate hike, and the median rate forecast rising from 3.4% in March to 3.75%; the median projection also showed rates falling to 3.6% in 2027.

One Fed official did not submit any rate projection; another did not provide a rate projection for 2028.

The median of Fed officials' projections showed core inflation at 3.3% by end-2026, up from 2.7% in March; GDP growth was projected at 2.2%, down from the previous 2.4%.

The Fed streamlined its policy statement, removing language about possible further rate adjustments and stating that 'the Committee will achieve price stability.'

The Fed said 'economic activity is expanding at a steady pace, despite high uncertainty due to factors including the Middle East conflict' and 'productivity growth and capital investment are strong.'

The Fed said employment growth 'is keeping pace with labor force growth, and the unemployment rate is little changed'; inflation remains elevated, 'partly reflecting supply shocks that have pushed up prices in sectors including energy.'