Deutsche Bank on FOMC Forward Guidance - FJElite

We expect the dot plot to show a general upward shift with 4-5 officials projecting a hike in 2026, thereby pushing the median up to 3.625%. We would not be surprised to see more officials projecting a hike than a cut in 2026 given that the most dovish forecaster, Stephen Miran, has now left the Board. We see the 25bps increase likely carrying over into 2027 and 2028 medians as well. In addition, we expect the median long-run rate to edge up further to 3.25%.
Note that Warsh might not submit dots, a possible indication of the eventual fate of what has become a key tool of quantitative guidance.

Beyond the dots, we will be most interested in revisions to 2027 inflation forecasts. For headline PCE, we expect the median estimate to rise by 70bps to 3.4% for 2026 and 10bps (to 2.3%) for 2027, leaving 2028 unchanged at 2.0%. We expect 2026 core PCE to rise by 30bps to 3.0% and 2027 to edge up a tenth to 2.3% - the latter is most important to watch as a more significant upward revision would be a stronger argument for higher interest rates.