Wall Street was expecting relief. It got the opposite.
The Federal Reserve’s June FOMC meeting concluded with the central bank holding its federal funds rate at 3.5-3.75%, which was expected. What wasn’t expected was the updated set of projections that accompanied the decision, painting an inflation picture far uglier than most traders had priced in.
The Fed now forecasts headline PCE inflation at 3.6% for 2026 and core PCE at 3.3%. The median year-end rate projection in the dot plot sits near 3.8%, which in plain English means: the people who set interest rates think those rates are more likely to go up than down from here.
The inflation problem that cheap oil can’t fix
Oil prices have settled around $80 per barrel, normalizing to roughly pre-conflict levels after earlier geopolitical disruptions related to Iran. May’s CPI came in at 4.2% year-over-year, up from 3.8% in April, with a monthly increase of 0.5%. That’s the highest annual rate since 2023, and it arrived despite the energy tailwind that should have been pushing numbers in the other direction.
