Following the Federal Reserve’s latest interest rate decision in June 2025, market watchers once again turned their attention to the central bank’s most anticipated visual tool: the “dot plot.” As part of the Fed’s Summary of Economic Projections (SEP), this chart reflects each policymaker’s outlook for the federal funds rate over the coming years — and it’s sending a cautiously dovish signal for 2025.

The updated dot plot shows that a majority of Fed officials anticipate two rate cuts by the end of this year. However, as always, the devil is in the details — and this chart is far from a crystal ball.

What Does the Dot Plot Actually Show?

The dot plot, published quarterly, displays the midpoint of each FOMC participant’s projection for the federal funds rate at the end of each year. On the Y-axis is the interest rate (in percent), and on the X-axis are calendar years: currently 2025, 2026, 2027, and the “longer run.”

Each blue dot represents one Fed official, including both voting and non-voting members. When the committee is fully staffed, there are 19 dots. The median dot — the central tendency — is typically viewed as the baseline market expectation.

In the June 2025 update, the largest group of Fed officials — eight in total — project two rate cuts this year, suggesting a federal funds rate around 4.25% by year-end. Two officials foresee more aggressive easing with three rate cuts, while two others expect just a single cut. Importantly, seven members believe the current high rate (around 5.25%) should be maintained through the rest of 2025. This dispersion signals a lack of consensus and ongoing economic uncertainty.

A Tougher Macro Environment: Stubborn Inflation, Slowing Growth

The Fed’s dot plot doesn’t stand alone — it comes with a broader set of economic forecasts in the SEP. These projections help contextualize why rate cuts may still be on the table despite lingering inflation concerns.

The Fed now expects core inflation, as measured by the Personal Consumption Expenditures (PCE) price index, to reach 3.1% in Q4 2025 — higher than the 2.8% projected just three months ago. Headline PCE inflation is expected to rise 3.0%, also up from 2.7% in the March estimate. That means inflation is still running well above the Fed’s long-term 2% target.

Simultaneously, the Fed’s updated economic outlook sees U.S. GDP growth slowing to just 1.4% in 2025 (down from a prior 1.7% forecast), and unemployment rising to 4.5% (compared to the current 4.2%).

Fed Chair Jerome Powell explained that slower growth is expected to partially offset the inflationary pressures stemming from new tariff policies. In his post-meeting press conference, Powell described the economic backdrop as “mixed,” with both inflation risks and downside growth pressures shaping the Fed’s policy stance.

The Dot Plot Is Not a Promise — Just a Baseline

While the dot plot provides a visual snapshot of where monetary policy might head, it is not a commitment. Fed officials themselves have repeatedly emphasized that their forecasts are subject to change — and in fact, often do.

For example, in late 2019, the Fed didn’t project interest rates would plunge to near-zero in 2020 — because it couldn’t foresee the COVID-19 pandemic. Similarly, in June 2024, no official predicted that rates would fall by a full percentage point by year-end, despite that ultimately occurring.

As Powell noted in a 2019 congressional hearing, “Focusing too much on individual dots may distort the big picture.” The dot plot reflects a conditional forecast — the Fed’s best estimate, assuming current trends hold.

Is the Dot Plot Here to Stay?

The future of the dot plot is itself under scrutiny. Several Fed officials, including Minneapolis Fed President Neel Kashkari, have voiced frustration with the rigid nature of the SEP. Meanwhile, Governor Christopher Waller warned that eliminating the dot plot could backfire by suggesting the Fed is hiding information.

Still, potential changes are being discussed ahead of the Fed’s upcoming 2025 policy framework review. Ideas include replacing calendar-year forecasts with rolling 6-, 12-, or 18-month intervals, or adding scenario-based projections (e.g., under strong growth vs. recession conditions).

Regardless of the approach, there’s agreement that more transparency needs to be balanced with clarity — too much data can obscure rather than inform.

Bottom Line: A Guidepost, Not a Roadmap

For investors, economists, and consumers, the Fed’s June 2025 dot plot sends a cautious message: rate cuts may be coming, but they are not guaranteed. Inflation remains elevated, economic growth is cooling, and labor market pressures are mounting.

While savings account yields may stay attractive in the near term, borrowing costs for mortgages, credit cards, and business loans could begin to ease later this year — if the Fed proceeds with its projected easing path.

In the end, the dot plot is just one tool in a larger toolbox. It offers a directional cue, not a definitive answer. In a highly dynamic environment marked by trade policy shifts, global tensions, and inflation volatility, flexibility and data-dependence will remain the Fed’s true guiding principles.