Reasoning
The Federal Reserve has maintained a restrictive monetary policy stance with the federal funds target range at 3.50 to 3.75 percent, and the June 2026 SEP median for the year end 2026 funds rate has been revised upwards to 3.8 percent, indicating a hawkish bias with nine participants projecting rates above the current target range. This sustained restrictive policy, combined with the elimination of a prior cutting bias at the June 17 meeting, suggests a drag on economic activity that could lead to below 1.0% annualized real GDP growth in Q3 2026, especially as previous stimulus effects wane.Key uncertainty
The degree to which consumer and business confidence react to the persistently high interest rate environment and the possibility of further tightening, as suggested by the dot plot.