Fed dot plot maintains forecast for 50 bps cut in 2025; GDP revised down, PCE inflation revised upward

The Federal Open Market Committee's (FOMC) latest dot plot indicates that interest rates will average 3.9% by the end of 2025, matching the March projection.

If this forecast comes true, the Federal Reserve (Fed) could implement two 25 basis points (bps) rate cuts or a single 50 bps cut in 2025.

In 2026, rates are projected to rise to 3.6% from the previous 3.4% and to 3.4% in 2027, above the 3.1% projected in the March dot plot. The longer-term forecast remains at 3.0%.

The Fed also revised its economic projections. US GDP is now projected at 1.4% this year, down from the previous forecast of 1.7%. For 2026, the economy is expected to grow by 1.6%, below the 1.8% estimated in March.

The unemployment rate is expected to rise to 4.5% by the end of 2025, compared to the 4.4% previously estimated. For 2026, it remains unchanged at 4.5%, above the March forecast at 4.3%.

Finally, PCE inflation is estimated to rise to 3.0% by the end of the year, up from the 2.7% previously forecast. In 2026, inflation is expected to ease to 2.4%, slightly higher than the 2.2% projected in March. By 2027, the PCE index is expected to reach 2.1%, up from March's expectations of 2.0%.