The FOMC raised the funds rate by 25bp to 3.75-4% today. While the hike was widely expected, the meeting was more hawkish than we expected in a few ways. First, a 16-2 majority projected at least one more hike this year, and there were no dissenting votes against today’s hike. Second, the median funds rate projection remained quite elevated through 2029, and the median neutral rate dot rose from 3.06% to 3.25%. Third, Chairman Warsh described the hike as having “removed a dose of accommodation” three times.We now expect the FOMC to deliver a second 25bp hike in October, a change from our previous expectation that September would be the only hike. We think October is the most likely time for the next move because it is most natural to deliver hikes that the FOMC presented today as supporting “a timelier return" to the 2% target at consecutive meetings. We have kept our forecast for the terminal rate unchanged at 3.25-3.5% by adding to the September and December 2027 rate cuts we already expected a third 25bp cut in March 2028.Additional hikes are possible but not our base case. One reason is that our forecast for core PCE inflation remains below the median FOMC participant’s forecast at 3.2% (vs. 3.4% for the FOMC) in 2026 Q4/Q4 and 2.2% (vs. 2.5% for the FOMC) in 2027 Q4/Q4. Some of the gap for 2026 could come from a reluctance on the part of some FOMC participants to pencil in a downward revision from methodological revisions that will be implemented later this month, which we estimate will be worth -0.2pp on the year-over-year rate, until the impact is clear.