The Federal Reserve kept its benchmark interest rate steady at 4.25%-4.5% on Wednesday, as expected. The central bank’s latest “dot plot” shows policymakers still anticipate two rate cuts in 2025 — unchanged from March — though a growing divide within the Fed is becoming clear.
Seven officials now expect no cuts this year, up from four in March, while two forecast only one cut. Meanwhile, twelve members see at least one rate cut by year-end, with a couple projecting more than 0.5% in reductions. The Fed also adjusted its economic outlook, raising inflation and unemployment forecasts while lowering growth expectations.
So far in 2025, the Fed has not delivered any rate cuts, after slashing 100 basis points in 2024. Markets had priced in one or two cuts this year, in line with the updated outlook.
Fed Chair Jerome Powell acknowledged the internal disagreement, noting that differing risk assessments — such as concerns over persistent inflation or a weakening labor market — are driving the divide. “Right now, it’s just a forecast in a very foggy time,” Powell said.