Dot Plot: Fed Officials Divided Over Interest Rate Outlook

The Federal Reserve’s latest “dot plot”—a chart summarizing individual policymakers’ projections for the federal funds rate—reveals growing division among Fed officials about the direction and pace of interest rate changes through the end of 2025.

Key Takeaways from the June 2025 Dot Plot

• Median Projection: Two Rate Cuts in 2025
  • The median forecast among the 19 Fed officials still points to two quarter-point (0.25%) rate cuts by the end of 2025, which would bring the target range down to around 3.75%–4.00%2579.
• Widening Split Among Policymakers
  • Seven officials expect no rate cuts at all this year, a notable increase from four in March279.
  • Eight officials anticipate two quarter-point cuts.
  • Two members see the need for an even larger reduction, while two others expect just one cut27.
  • This divergence highlights a “healthy diversity of views,” according to Fed Chair Jerome Powell, reflecting uncertainty about inflation, growth, and the impact of recent tariffs and geopolitical risks78.
• Economic Outlook: Higher Inflation, Slower Growth
  • Fed officials now expect both inflation and unemployment to be higher by year-end than previously projected, while the economic growth outlook has weakened459.
  • The Fed’s “wait-and-see” approach is influenced by ongoing uncertainty over U.S. trade policy, tariffs, and the broader global outlook48.
• No Immediate Rate Changes
  • The Fed unanimously held rates steady at 4.25%–4.50% at its June meeting, marking the fourth consecutive meeting without a change3458.
  • Most investors and analysts do not expect a rate cut before September, given the current economic data and policy uncertainties36.

Reasons for Division

• Uncertainty Over Tariffs and Policy
  • The unpredictability of U.S. trade and tariff policies, especially following recent announcements and suspensions of tariffs by President Trump, has complicated the Fed’s economic outlook248.
• Mixed Economic Signals
  • While inflation has cooled from its 2022–2023 peaks, it remains above the Fed’s 2% target, and job growth, though slowing, has not deteriorated sharply49.
• Geopolitical Risks
  • The escalating crisis in the Middle East and potential global economic repercussions are adding to the uncertainty38.

Looking Ahead

• Further Divergence Possible
  • The variance in projections increases for 2026 and beyond, underscoring persistent uncertainty and the likelihood that the Fed’s path will be data-dependent7.
• Market Expectations
  • Financial markets have priced in one to two rate cuts for 2025, broadly in line with the median Fed projection but reflecting skepticism about deeper or earlier cuts56.

“We have pretty healthy diversity of views on the committee,” said Fed Chair Jerome Powell. “People can look at the same data and evaluate the risks differently.”7

Summary Table: 2025 Fed Officials’ Rate Projections

The Fed’s dot plot underscores a central bank grappling with uncertainty, divided over how quickly to ease policy amid persistent inflation, policy shifts, and global risks. The consensus for two cuts masks a wide range of views, and the outlook may shift as new economic data em