Every three months, Federal Reserve policymakers write down where they think interest rates are heading, and the newest set of guesses runs noticeably higher than the one they published in June. In the projections released September 16, the median official now sees the Fed’s benchmark rate sitting near 4.1% at the end of 2027, compared with 3.6% when the same committee looked ahead to that year back in June. The upward shift covers not just the rate path but the inflation and unemployment numbers behind it.
The Sept. 16 Summary Of Economic Projections
Four times a year, FOMC members submit individual forecasts for growth, inflation, unemployment and the federal funds rate, and the Fed publishes the median of those forecasts as the Summary of Economic Projections. The September 2026 release puts the median federal funds rate at 4.1% at the end of both 2026 and 2027, before easing to 3.9% in 2028 and settling at a longer-run 3.2%. Because each SEP reflects the committee’s read of the economy at that specific moment, the September numbers arrived alongside the Fed’s own quarter-point rate increase the same day, to a target range of 3.75% to 4%, rather than as a standalone forecast issued in isolation.
The SEP is built from each individual committee member’s own submission, not a single consensus figure the group negotiates in the room, and the Fed reports the median of those submissions as the headline number. That structure is why the projections can shift meaningfully between quarterly releases even without any single new piece of data: if enough individual members move their own estimate up or down between June and September, the median moves with them, which is effectively what happened with the 2027 rate projection.
The forecast the Fed doesn’t translate into a plan: A median projection of 4.1% describes where Fed officials expect a policy rate to sit, not what it means for the tax bill on a retirement account withdrawn from this year or next. See the four calculators in The Retirement Tax & Withdrawal Planner.
The 2027 Median Climbing To 4.1% From 3.6% In June
The clearest sign of how much the committee’s outlook moved is the 2027 line itself: the median projection for the federal funds rate at the end of that year rose to 4.1%, up from 3.6% in the June 2026 SEP. The 2026 median moved by a similar margin, from 3.8% in June to 4.1% in September. A half-point shift in a projection two years out is a meaningful revision for a body that usually adjusts its dot plot in smaller increments meeting to meeting; it signals that officials, collectively, expect to hold rates higher for longer than they thought as recently as midyear, not merely that they raised rates once in September.
With both the 2026 and 2027 medians now converging at 4.1%, the newest projections describe a Fed that expects to hold its benchmark rate roughly steady into 2027 rather than cutting it, which is a different picture than the June forecast implied. In June, the 2027 median sat three-tenths of a point below the 2026 figure, consistent with a committee that expected at least some easing over that stretch; the September numbers erase that gap entirely.
Why The Inflation And Employment Outlook Shifted
The rate projections did not move on their own. The same September SEP raised the median forecast for 2026 PCE inflation to 3.7%, and core PCE inflation to 3.4%, both higher than the 3.6% and 3.3% the committee projected in June, while real GDP growth ticked up to 2.3% from 2.2% and the median unemployment-rate projection for 2026 came in at 4.1%. Higher expected inflation alongside firmer growth is the combination that typically pushes a rate projection up rather than down: with price growth still running above the Fed’s 2% goal and the labor market not visibly weakening, the median official saw less room to project rate cuts than in June.
Each of those figures is itself a median across 19 individual FOMC participants, not a single number the Fed calculates from incoming data the way a monthly jobs or inflation report is calculated. When more of those participants raise their own inflation estimate between one quarterly meeting and the next, the median inflation projection rises even without any single new economic release forcing the change, and the rate projection tends to follow the same direction since a higher expected inflation path is generally read internally as calling for a higher policy rate to bring it back toward target.
The Rate Hike That Came With The New Projections
The projections were released the same day the FOMC raised the federal funds target range by a quarter point, to 3.75% to 4%, on a unanimous vote. The statement accompanying that decision said “inflation remains elevated” and that the move “will support a timelier return to the Committee’s 2 percent goal,” language that lines up with the higher inflation figures in the projections released alongside it. Job gains, the statement added, “have kept pace with the workforce, and the unemployment rate has changed little” — the steadier labor-market language that helps explain why the committee raised rates rather than held them steady.
Kevin Warsh On Why The Committee Moved
Fed Chair Kevin Warsh characterized the reasoning behind both the hike and the higher projections in blunt terms, saying inflation “is too high and has been for too long” and describing the quarter-point increase as having “removed a dose of accommodation” through a decision he called “serious and responsible.” Those remarks, delivered alongside the September SEP, tie the higher 2027 median directly to the committee’s read that inflation needs more restrictive policy for longer than it expected in June — the same read that moved the 2027 projection from 3.6% to 4.1% in three months.
Turning A Rate Projection Into An Actual Withdrawal Number
The Fed’s median projection puts its benchmark rate near 4.1% at the end of 2027, up from 3.6% in June, but that figure describes Fed policy, not what a specific IRA or 401(k) withdrawal owes in tax this year or how a Roth conversion should be timed around it. A retiree weighing a withdrawal has to translate a macro forecast like this one into a household-level number, which the projection itself does not do.
The Retirement Tax & Withdrawal Planner includes a provisional-income calculator and an RMD-schedule calculator, plus the senior deduction, for running that translation against a household’s own accounts.
Open the provisional-income calculator in The Retirement Tax & Withdrawal Planner.
This article was produced with AI assistance and checked against the primary sources linked above.
David M. Keller is a finance writer based in Columbus, Ohio, covering personal finance and consumer-focused economic topics. He earned his degree in journalism from Ohio University and began his career reporting on local business and economic trends for a regional media outlet. Since then, he has contributed to a variety of online publications, focusing on clear, practical coverage of topics such as cost of living, debt, and everyday financial decision-making.
