Washington: The US Federal Reserve raised its inflation forecasts for 2026 on Wednesday, while lowering unemployment projections, signaling persistent price pressures alongside a resilient labor market.

According to Anadolu Agency, the median forecast for core personal consumption expenditures (PCE) inflation was raised to 3.4% for 2026 from 3.3% in June, as per the Fed's latest Summary of Economic Projections. The core measure, which excludes volatile food and energy prices, is expected to ease to 2.5% in 2027, 2.2% in 2028, and 2% in 2029.

The headline PCE inflation forecast for 2026 was also lifted by 0.1 percentage point to 3.7%. Inflation is projected to fall to 2.3% in 2027, 2.1% in 2028, and reach the Fed's 2% target in 2029. The upward revisions came despite upcoming methodological changes by the US Bureau of Economic Analysis that economists expect to mechanically lower measured core PCE inflation. These changes, set to take effect with annual revisions on September 30, concern the measurement of prices for services including portfolio management, legal services, and computer software.

The Fed, meanwhile, presented a stronger outlook for the labor market. Officials lowered their median unemployment-rate forecast for 2026 to 4.1% from 4.3%. The rate is projected to remain at 4.1% through 2029, compared with the June estimates of 4.3% for 2027 and 4.2% for 2028.

Changes to the growth outlook were limited. The Fed raised its real gross domestic product growth forecast for 2026 to 2.3% from 2.2%, and its 2027 estimate to 2.4% from 2.3%. The projection for 2028 was unchanged at 2.2%, while the economy is forecast to grow 2.1% in 2029.

The revisions accompanied the Fed's decision to raise its benchmark interest rate by 25 basis points to a target range of between 3.75% and 4%, marking its first increase since 2023.