Bankers Forecast Rate Hike Amid Persisting Inflation
The American Bankers Association predicts higher borrowing costs for households as inflation remains above target.
Updated on Sept. 23, 2026 in Economic Indicators
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The American Bankers Association's Economic Advisory Committee has released its forecast for late 2026 and 2027. The committee anticipates that persistent inflation will lead to a federal funds rate hike in the fourth quarter of 2026.
Why it matters
Higher inflation, driven by oil prices and service costs, continues to exceed the Federal Reserve's 2% target. This environment creates sustained upward pressure on interest rates and maintains existing constraints on housing market activity.
The committee projects core PCE inflation to reach 3.3% in Q4 2026 and 2.4% in 2027, well above the 2% Federal Reserve target. These projections suggest continued pressure on costs for consumers alongside a projected mortgage rate floor of 6.8%.
The players
American Bankers Association
A trade association representing member banks that provide retail lending, credit cards, and mortgage products to consumers.
Federal Reserve
The central bank of the United States that manages interest rates and sets monetary policy to influence inflation and employment.
The details
The committee expects the Federal Reserve to implement a rate hike in late 2026 as services inflation and energy costs keep price pressures elevated. These higher rates are expected to continue constraining housing sales, alongside the lingering mortgage lock-in effect and already high home prices. Meanwhile, business investment in data centers and technology is forecast to grow, supported by productivity gains despite slower growth in the labor force.
Timeline
Q3 2026: Projected real GDP growth of 2.7%.
Q4 2026: Projected federal funds rate hike and 3.3% core PCE inflation.
2027: Projected 2.2% real GDP growth and 2.4% core inflation.
Money Landscape
Current economic forecasts indicate that price growth will persist above the Federal Reserve's 2% inflation target through the end of 2027. This suggests a prolonged period of elevated interest rates following the increases initiated in September 2026.
Households should prepare for sustained borrowing costs as mortgage rates remain near a 6.8% floor and further rate hikes are anticipated. Review your budget for high-interest debt and consult a financial professional to discuss how these rate projections might impact your long-term savings.
The takeaway
The projected path of inflation and interest rates suggests that high borrowing costs are likely to persist well into 2027. Households should monitor future Federal Reserve policy announcements to understand how these trends might influence their upcoming major purchases or refinancing plans.
Further reading
For more information on the current state of the national economy, visit our Economic Indicators section.
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