The Federal Reserve's (Fed) latest dot plot projections, released by the Federal Open Market Committee (FOMC) on Wednesday, show policymakers now expect interest rates to stand at 3.8% by the end of 2026, up from 3.4% in March and above the current midpoint of the target range, signaling that officials now see a possible rate hike this year.

For 2027, officials project the federal funds rate at 3.6%, higher than the 3.1% estimate published in March. The rate is expected to ease to 3.4% in 2028, also above the previous 3.1% projection. The longer-run rate remains unchanged at 3.1%.

The Fed also revised its economics projections. The US Gross Domestic Product (GDP) is now projected at 2.2% this year, down from the previous forecast of 2.4%. For 2027, the U.S. economy is expected to grow by 2.3%, unchanged from previous estimates.

The unemployment rate is expected to be at 4.3% by the end of 2026, down from the previously estimated 4.4%. The jobless rate is projected to remain at 4.3% in 2027, matching March projections.

Finally, the Personal Consumption Expenditures (PCE) inflation is estimated to rise by 3.6% by the end of 2026, significantly above the 2.7% projected in March. In 2027, PCE inflation is projected at 2.3%, slightly higher than the 2.2% projected previously. By 2028, the PCE index is expected to reach 2.0%, in line with previous projections.