The FRED^® Blog

In a previous FRED Blog post, we discussed the Summary of Economic Projections (SEP) released by the FOMC this past June. In this blog post, we again use ALFRED to compare the latest set of projections released in September 2026 with several recent projections for the unemployment rate, core personal consumption expenditures (PCE) inflation, real GDP growth, and the federal funds rate.

It is important to note that these projections represent neither a committee plan nor a binding decision on future policy.

Our first ALFRED graph, above, shows the median projection for the unemployment rate for the fourth quarters of 2026, 2027, 2028, and 2029. This latest set of projections is the first to include 2029, as every September the FOMC adds another year to the SEP. Most recently, as shown by the gold bar, the median FOMC participant projects that the unemployment rate will average 4.1% in Q4 2026 and remain at that level through Q4 2029. This is slightly below the median projections from June.

Our second graph shows the median projection for core PCE inflation over the same period. The median FOMC participant projects 3.4% core PCE inflation over 2026, with a return to the long-run inflation target of 2% by 2029.

Our third graph shows the median projections for real GDP growth. For 2026, real GDP growth was revised up from 2.2% in June to 2.3% in September, still shy of the 2.4% projected in March. The projection for real GDP growth in 2027 is slightly higher than it was in both March and June, revised up from 2.3% to 2.4%. Looking further ahead, the median projection for 2028 matches June’s result of 2.2% while the initial projection for 2029 stands at 2.1%, suggesting the Committee anticipates growth converging toward its longer-run trend of 2.0%

Our final graph shows the median participant’s projections of the federal funds rate. You may notice that the blue bar depicts the September 2025 vintage. This is because the SEP projections for the federal funds rate in December 2025 were exactly the same as the September 2025 vintage.

As of the September 2026 SEP, the median projection for the federal funds rate at the end of this year is 4.1%, where it remains in 2027 before falling to 3.9% by year-end 2028. These projections are higher than those in June by 0.3 percentage points this year and 0.5 percentage points in both 2027 and 2028. The fourth quarter projection for 2029 stands at 3.6%.

It’s worth noting that focusing on the median federal funds rate projection can obscure the dispersion of the individual participant projections. For example, projections for the 2029 year-end policy rate range from 2.9% to 3.9%.

How these graphs were created: Search ALFRED for “FOMC unemployment” and take the median projection. Click on “Edit Graph,” choose a bar graph, and add three bars with the same series again. Finally, select the proper vintage for each bar. Change the dates to 2026-01-01 to 2029-01-01. For the other graphs, proceed similarly with “FOMC PCE core,” “FOMC GDP,” and “FOMC federal funds rate.”

Suggested by Rehann Silvanus and Kathleen Navin.

The takeaway

The Kansas City Fed uses options prices to measure how financial markets perceive the balance of risks for future short-term interest rates: a.k.a., the KC Policy Rate Skew.

The data

Options are publicly traded financial instruments that reflect expectations about future economic conditions. The Kansas City Fed uses options prices to create their daily index of how financial markets perceive the balance of risks, or “skew,” to short-term U.S. interest rates one year in the future. Our FRED graph above shows the value of this “KC PRS” index over the past five years, although daily data in FRED are available as far back as April 3, 1989.

FYI, the KC PRS is constructed with the same methodology as the Chicago Board Options Exchange Skew Index (Cboe Skew) on the Chicago Mercantile Exchange’s options data.

The interpretation

Although the ups and downs of the KC PRS don’t match the expansions and contractions of the business cycle, research from the KC Fed indicates that this index tends to lead (i.e., occur ahead of) the cyclical patterns in interest rates

A positive value of the KC PRS index indicates financial markets believe interest rates are more likely to end up higher than projected, whereas a negative value suggests rates could end up lower than projected. Between mid-September 2022 and late March 2026, the index generally showed values below zero. Between early 2026 and the time of this writing, it has averaged values above zero.

How this graph was created: Go to FRED and search for “Kansas City Fed’s Policy Rate Skew.” To plot the data over the past five years, click on the “5Y” link above the graph’s canvas.

Suggested by Diego Mendez-Carbajo.

The takeaway

The Fed’s monetary aggregates measure the amount of money in the economy. One such measure is M2, which includes liquid assets such as checking accounts but excludes non-liquid assets such as individual retirement accounts.

What is M2?

M2 measures how much money is readily available in the economy. That is, funds easily converted to cash. As of June 2026, M2 amounted to $23 trillion.

Our FRED graph above shows the components of M2:

• M1 in blue, which itself includes cash and checking and savings accounts
• Small-denomination time deposits in green
• Retail money market funds in brown
• The total value of individual retirement account (IRA) and Keogh retirement account balances, in purple, is subtracted from this measure. These funds carry large penalties for preretirement withdrawals and, therefore, aren’t considered liquid.

Recent changes

Surveys by the Board of Governors of the Federal Reserve System in recent years show that a growing share of IRA and Keogh balances held at depository institutions now sit in savings and checking-type accounts, rather than in small-denomination time deposits or in retail money market funds.

Starting July 28, 2026, these IRA and Keogh balances have been subtracted from the total value of M2, rather than from the individual values of the small-denomination time deposits and retail money market funds. This had almost no impact on the total value of M2, but it did result in the recalculation of those two components.

Graph these changes

ALFRED stores vintages of FRED data and allows you to see the historical values of both small-denomination time deposits and retail money market funds before and after this reporting changes. Both data series now show higher values.

More details

M2 data come from the Fed’s H.6 statistical release, Money Stock Measures, published weekly by the Federal Reserve Board. Keep up with their announcements here.

What about that orange area in the graph? It shows saving deposits. As of April 2020, this component was reclassified from a category of M2 into M1, so our graph doesn’t show the value past that date. Learn more about this regulatory change here.

How this graph was created: Search FRED for “M1.” Click the “Edit Graph” button and select the “Add Line” tab to search for “Small-Denomination Time Deposits: Total.” Don’t forget to click “Add data series.” Repeat this last step to search for and add the other two series: “Retail Money Market Funds” and “IRA and Keogh Accounts: Total.” Next, use the “Select Area” dropdown menu to customize “Line 4 – IRA and Keogh Accounts” by typing the formula -a and clicking on “Apply Formula.” Last, select the “Format” panel to pick “Graph type: Area” and “Stacking: Normal.”

Suggested by Maria Arias and Diego Mendez-Carbajo.