Fed Projects Moderate Growth Through 2028, Sees Inflation Finally Normalizing

The Federal Reserve just dropped its long-term forecast—and it's painting a picture of a slow-bleed normalization. No fireworks, just a gradual return to their elusive 2% target. For markets hooked on cheap money, the message is clear: the party's winding down.

Growth Gets a Reality Check

Forget the sugar rush of zero-interest-rate policy. The Fed's latest outlook dials back expectations to a steady, unspectacular pace. They're betting on a controlled descent—no hard landing, but no return to the turbocharged pre-pandemic expansion either. It's the economic equivalent of a managed decline.

The 2028 Inflation Mirage

Here's the punchline: full normalization gets penciled in for 2028. That's three more years of threading the needle between cooling prices and avoiding a recession. It's a forecast that assumes no new shocks, no geopolitical fires, and a patient public—because what could possibly go wrong in a three-year window?

Markets in the Adjustment Phase

This isn't a pivot; it's a prolonged adjustment. The era of reacting to every Fed whisper is giving way to a grinding marathon. Volatility won't disappear, but its catalysts will shift from rate-cut speculation to real economic data—jobs, wages, and corporate earnings. The free-money narrative is officially retired.

The Fed's forecast is a masterpiece of lowered expectations—setting the bar so low they might just trip over it on the way to 2028. Because in central banking, a prediction three years out is less a forecast and more a hopeful footnote for the next committee to deal with.

The Federal Reserve’s December meeting minutes highlight a steady but moderate U.S. economic growth, with the labor market slowing and wage increases staying in line with last year. Officials warned that a potential government shutdown could drag on near-term GDP. Looking ahead, the Fed expects growth to run slightly above potential after 2025, with inflation gradually returning to the 2% target by 2028, though risks and uncertainties remain elevated.