Payden & Rygel: Fed Open Market Committee Core PCE projection

Payden & Rygel: Fed Open Market Committee Core PCE projection

September 21, 2026

Interest Rates Fed

'You keep using that word. I do not think it means what you think it means.' The Federal Reserve raised the target range for its policy rate by 25 basis points this week after keeping it flat for nine months.

At the press conference, the Fed Chair used a certain phrase, "timelier return", five times to explain the decision. Specifically, that higher rates will encourage a 'timelier return' of inflation to 2%.

Interestingly, with this week's rate hike and one more projected by December, the FOMC doesn't expect inflation to return to 2% until...2029, which would mean inflation will spend eight years above the Fed's target. More worrisome, how will inflation return to target with the projected continued robust growth and a solid labor market? 

One explanation is that 8 of 18 policymakers think further rate increases will be required in 2027. Or, as it did in the past, policymakers' projections serve more as hope than forecast. The Fed Chair did acknowledge that "inflation risk" is still to the upside, which could require more rate increases. That's our hunch; otherwise, it's also possible policymakers don't really know what that word means.

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