I created the above chart from CME Fedwatch projections on September 20.

The Fed and the market project roughly the same path through December of 2025.

However, the Fed “dot plot” of economic projections has the Fed Funds rate for December of 2026 at a median rate of 3.4 percent. In contrast, the market projects a year-end 2026 rate of 3.0 percent.

Looking at things another way, the market see the March Fed Funds rate at 3.44 percent in March of 2026. That’s the year-end projection by the Fed for December.

Trump on Interest Rates

The Federal Reserve should get our interest rates down to ZERO, or less, and we should then start to refinance our debt. INTEREST COST COULD BE BROUGHT WAY DOWN, while at the same time substantially lengthening the term. We have the great currency, power, and balance sheet.....

— Donald J. Trump (@realDonaldTrump) September 11, 2019

The Federal Reserve should get our interest rates down to ZERO, or less, and we should then start to refinance our debt. INTEREST COST COULD BE BROUGHT WAY DOWN, while at the same time substantially lengthening the term. We have the great currency, power, and balance sheet…..

Summary of Economic Projections

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Please consider the Fed’s Summary of Economic Projections from the September 17, 2025 FOMC meeting.

“Appropriate monetary policy” is defined as the future path of policy that each participant deems most likely to foster outcomes for economic activity and inflation that best satisfy his or her individual interpretation of the statutory mandate to promote maximum employment and price stability.

SEP Summary

• Year-over-year GDP: 1.6 percent in the fourth quarter. The longer run is 1.8 percent.
• Unemployment Rate: Rising to 4.5 percent by December
• PCE inflation 3.0 percent. The longer run, as always, is what the Fed wants to see. It’s consistent arrogance.
• Fed Funds Rate: 3.6 percent for December. The longer term is 3.0 percent.

Trump is not be happy with the Fed’s projections of interest rates, the unemployment rate, inflation, or GDP.

The Fed’s Interest Rate Projections and Trump’s Demands Are Light Years Apart

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On September 17, 2025, I noted The Fed’s Interest Rate Projections and Trump’s Demands Are Light Years Apart

The Fed is quite undecided where interest rates should be. Trump isn’t.

Fed Notes “Challenging and Unusual” Setup on Unemployment and Inflation

On September 17, I commented Fed Notes “Challenging and Unusual” Setup on Unemployment and Inflation

Powell says risks to inflation are to the upside. Risks to labor market are to the downside.

“Think of this as a risk-management cut. There are no risk-free paths. It’s not obvious what to do,” said Powell. Click above link for more quotes.

Why Does the Fed Project Fewer Cuts?

The SEP has the answer.

For December of 2026, the Fed median Core PCE inflation expectation is 2.6 percent, up from 2.4 percent in June.

PCE stands for Personal Consumption Expenditures. Core PCE excludes food and energy.

The Fed’s inflation target is 2.0 percent but the Fed expects 2.6 percent.

If the PCE inflation forecast is in the ballpark, The Fed will not be cutting rates much in 2026.

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