Fed Flags Possible Rate Hike This Year as CPI Reaches 4.2% in May 2026 and Policy Rate Holds at 3.50% to 3.75%

The Federal Reserve signaled it may raise interest rates this year and expects higher inflation in 2026 as U.S. CPI rose to 4.2% in May 2026, the highest in three years. The federal funds rate target remains 3.50% to 3.75%, prompting markets to reduce expectations for near term rate cuts.