In its penultimate Summary of Economic Projections before this year’s Election Day, participating members of the Federal Open Market Committee announced they anticipate just one 25-basis point cut to the federal funds rate this year. A single cut, likely at the Federal Reserve‘s final FOMC meeting of the year, would mean interest rates would remain at their 23-year high until after Joe Biden and Donald Trump face off at the ballot box.

The Fed has long expressed far more caution in its predictions than investors. Whereas the central bank projected three rate cuts at the start of 2024, bond markets had priced in the probability of more than twice that many cuts.

On the heels of the first good consumer price index report of the year, Treasurys futures pounced on the probability that the Fed would deliver at least one rate cut at the final September FOMC meeting before the election. But despite the FOMC acknowledging “modest” progress on bringing inflation back down to its maximum 2% target, Fed members now see both inflation and interest rates remaining much higher than they projected back in the last SEP released in March.

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The Fed upgraded its 2024 median personal consumption expenditures price inflation estimate from 2.4% in March to 2.6% in this latest SEP. The median core PCE projection was increased from 2.6% in March’s SEP to 2.8% now. Most dramatic is the difference between March’s expectation of a median federal funds rate of 4.6% for the year to 5.1% in June. Whereas the March SEP had just two Fed members anticipating no rate cuts at all in 2024, four agreed in June’s SEP.

The Fed now expects the median federal funds rate to remain above 4% in 2025 and 3% in 2026. In other words, higher for longer — both higher inflation and higher interest rates — is here to stay.