The Federal Reserve’s latest “dot plot” outlining future interest rate moves suggests the central bank will still cut rates twice this year, unchanged from its March outlook, though June’s forecast shows a more divided Fed weighing its next move on interest rates.
The Fed announced Wednesday that it held its benchmark interest rate in a range of 4.25%-4.5%, as expected. This marked the fourth straight meeting the Fed kept rates unchanged since cutting rates by 0.25% back in December.
Read more: The Fed’s dot plot explained
Along with its policy announcement, the Fed released updated economic forecasts in its Summary of Economic Projections (SEP), including its “dot plot,” which maps out policymakers’ expectations for where interest rates could be headed in the future.
The central bank raised its projections for inflation and unemployment at the end of this year while lowering its forecast for economic growth.
Fed officials see the fed funds rate falling to 3.9% this year, on par with its previous March projection. Coming into the decision, markets had priced in one to two additional rate cuts this year, according to Bloomberg data. The central bank slashed interest rates by a total of 100 basis points in 2024. It has yet to deliver rate cuts so far this year.
In 2026, officials see one additional cut; in March, the Fed expected to cut rates twice next year.
Twelve officials predict a rate cut this year, with two officials seeing a decrease of more than 0.5%.
Most notable in Wednesday’s dot plot were forecasts that showed seven FOMC members see no change in rates this year, signaling a more hawkish stance compared to March when four officials saw no change. Two FOMC members expect only one interest rate cut this year.
Federal Reserve Chair Jerome Powell acknowledged that growing divide among committee members during his post-decision press conference, explaining, “As we see more data, we’re going to learn more about where inflation is headed. And that means when it is time to [resume] our normalization process, the differences you may see should be smaller because we’ll have seen actual data. Right now it’s just a forecast in a very foggy time.”
Powell added that part of the divergence stems from how different members assess risk, adding, “People can look at the same data and evaluate the risks differently… the risk of higher inflation, the risk that it will be more persistent, [or] the risk that the labor market will weaken.”
The updated forecasts suggest the Federal Reserve will continue to take a cautious approach as officials attempt to understand the Trump administration’s shifting trade narrative and other policy unknowns, such as the implications of the president’s tax proposal.
Meanwhile, fears over stagflation, a bleak economic scenario in which growth stalls, inflation persists, and unemployment rises, have escalated since the start of the year — and Wednesday’s projections continued to underscore that sentiment.
Read More: What is stagflation, and how does it impact you?
The SEP indicated the Federal Reserve sees core inflation hitting 3.1% this year, higher than March’s projection of 2.8%, before cooling to 2.4% in 2026 and 2.1% in 2027.
The Fed also sees the unemployment rate rising to 4.5% this year, higher than its previous forecast of 4.4%. As of May, the unemployment rate stood at 4.2%. Unemployment is expected to remain at that level — 4.5% — through 2026 before ticking down to 4.4% in 2027.
The Fed also downgraded its previous forecast for US economic growth, with GDP expected to grow at an annualized pace of 1.4% this year before reaching 1.6% growth in 2026 and 1.8% in 2027.
In March, officials saw GDP growth at 1.7% this year before reaching 1.8% in 2026 and 2027.
Allie Canal is a Senior Reporter at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, and email her at alexandra.canal@yahoofinance.com.
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