The Fed’s dot plot shows just two rate cuts in 2025, fewer than previously expected

The Federal Reserve on Wednesday predicted just two quarter-point interest rate cuts in 2025, fewer than previous forecasts, according to the central bank’s medium-range projection for interest rates.

The so-called dot plot, which indicates individual members’ expectations for interest rates, showed officials see their benchmark lending rate falling to 3.9% by the end of 2025, corresponding to a target range of 3.75% to 4%. The Fed had previously expected four quarter-point cuts, or a full percentage point reduction, in 2025 at a meeting in September.

At the Fed’s last policy meeting of the year on Wednesday, the committee lowered its overnight lending rate to a target range of 4.25%-4.5%.

A total of 14 out of 19 officials wrote in 2025 two quarter-point rate cuts or less. Only five members expected more than two rate cuts next year.

Assuming quarter-point increases, officials indicate two more cuts in 2026 and another in 2027. Longer term, the committee sees the “neutral” funds rate at 3%, 0.1 percentage point higher than the September update, a level that has been gradually drifting higher in year.

Here are the Fed’s latest measures from 19 FOMC members, both voters and non-voters:

The projections also showed slightly higher expectations for inflation. Projections for headline and core inflation, according to the Fed’s preferred gauge, were raised to 2.4% and 2.8%, respectively, compared with September estimates of 2.3% and 2.6%.

The committee also pushed up its projection for full-year gross domestic product growth to 2.5%, half a percentage point higher than in September. But in the following years, officials expect GDP to slow down to its long-term projection of 1.8%.

As for the unemployment rate, the Fed lowered its estimate to 4.2% from 4.4% previously.

— CNBC’s Jeff Cox contributed reporting.