Reasoning
The December 2026 SEP would need to show a higher median year end 2026 funds rate than the June 2026 median of 3.8 percent, which is already 5 basis points above the current 3.50 to 3.75 target range. For the December SEP to show a higher median, either the Committee must raise rates between now and December (only 2.5 months remain) or median participant projections must shift higher despite unchanged policy. Given that Chair Warsh held rates steady on June 17 and erased the prior cutting bias, the Committee appears data dependent rather than committed to near term hikes. Historical precedent shows SEP medians rarely move materially higher in back to back projections without actual rate moves. The June SEP already incorporated hawkish repricing (nine of eighteen above the current range), leaving limited room for further upward surprises.Key uncertainty
Whether incoming economic data between now and the December FOMC meeting (likely early December) shows sufficient inflation persistence or labor market strength to shift a material number of participants toward higher year end rate projections, particularly among the minority who currently project below 3.8 percent.