The Federal Reserve's latest economic projections show inflation and interest rates staying higher for longer, but offer a path to cooling by 2027. The Federal Open Market Committee now expects the federal funds rate to reach 3.8% by year-end, up from a prior forecast of 3.4%, with inflation in 2026 seen at 3.6% versus an earlier estimate of 2.7%. Despite elevated uncertainty, the Fed noted that economic activity is expanding at a solid pace, with strong productivity and capital investment. The outlook calls for inflation to decline to 2% by the end of 2028, allowing the fed funds rate to fall back to an average of 3.4%.