“Fed Holds Rates Steady, Signals Two Cuts in 2025 as Dot Plot Reveals Hawkish Shift and Divided Outlook”

Key Points

Research suggests the Federal Reserve will likely implement two rate cuts in 2025, reducing the federal funds rate from 4.25%-4.50% to around 3.75%-4.00%.
The evidence leans toward a more hawkish stance overall, with increased caution on inflation and fewer expected rate cuts in future years.
There is some controversy, as projections show a split among officials, with some expecting no cuts, reflecting a cautious monetary policy approach.

Current Rate and Projected Cuts

The Federal Reserve currently maintains the federal funds rate at 4.25%-4.50%. Projections indicate two rate cuts in 2025, each likely 0.25%, bringing the rate to approximately 3.75%-4.00% by year-end, based on median expectations.

Hawkish Turn

Despite the projected cuts, the Fed’s overall stance has turned hawkish. The median year-end rate for 2025 is now 3.6%, up from 3.4% in March, and seven out of 19 officials expect no cuts this year, up from four, signaling caution on inflation.

Survey Note: Federal Reserve’s 2025 Rate Cut Projections and Hawkish Stance

The Federal Reserve’s recent projections, as of June 18, 2025, indicate a nuanced approach to monetary policy, with officials anticipating two rate cuts in 2025 while adopting a more hawkish outlook overall. This shift reflects growing concerns about inflation and a cautious approach to future rate adjustments. Below, we explore the current rate, projected cuts, and the hawkish turn, providing a comprehensive overview based on available information.

Current Federal Funds Rate

As of the latest Federal Open Market Committee (FOMC) meeting, the federal funds rate is set at 4.25%-4.50%, a range that has been held steady for the fourth consecutive meeting, as reported by Bloomberg. This stability underscores the Fed’s cautious approach amid ongoing economic assessments.

Projected Rate Cuts for 2025

The Fed’s projections, detailed in the Summary of Economic Projections (SEP), suggest two rate cuts in 2025, each typically 0.25%. If implemented, this would reduce the federal funds rate from the current 4.25%-4.50% to approximately 3.75%-4.00% by the end of the year. However, the median projection for the year-end federal funds rate is 3.6%, as noted by Yahoo Finance, which implies a midpoint slightly lower than the expected range after two cuts, suggesting some officials anticipate additional easing or a different interpretation of the rate range.

The dot plot, a key component of the SEP, shows individual policymakers’ expectations, with eight of the 19 FOMC members projecting the rate range to be 3.75%-4.00% by year-end, as per Reuters. This aligns with two 0.25% cuts from the current upper bound of 4.50%, bringing it to 4.00%, and the lower bound from 4.25% to 3.75%. However, the median of 3.6% suggests a broader distribution, with some expecting rates below 3.75%, potentially indicating three cuts, though consensus leans toward two.

Hawkish Stance and Policy Shift

Despite the projection of two cuts, the Fed’s overall stance has turned more hawkish compared to earlier forecasts. The median year-end policy rate for 2025 is now 3.6%, up from 3.4% projected in March, as reported by U.S. News & World Report. This upward revision indicates a more cautious approach, with the Fed prioritizing inflation control over aggressive rate reductions.

The hawkish turn is further evidenced by an increasing number of policymakers expecting no rate cuts. Seven FOMC members now see no change in rates this year, up from four in March, as noted by Yahoo Finance. This growing division, highlighted in the dot plot, reflects a split central bank, with some officials advocating for tighter monetary policy amid concerns about inflation worsening, as mentioned by The Australian Financial Review.

The Fed’s decision to hold rates steady for the fourth straight meeting, as detailed in Bloomberg, reinforces this cautious stance. Federal Reserve Chair Jerome Powell’s statements during the press conference, as reported, indicate that the Fed is monitoring economic data closely, particularly inflation, before proceeding with cuts, which aligns with a hawkish narrative.

Comparative Analysis

To provide a structured comparison, the following table outlines key aspects of the Fed’s current policy and projections:

Aspect	Details
Current Federal Funds Rate	4.25%-4.50%
Projected Rate Cuts in 2025	Two cuts, each 0.25%, likely bringing rate to 3.75%-4.00%
Median Year-End Rate for 2025	3.6%, up from 3.4% in March
Hawkish Indicators	Seven FOMC members expect no cuts (up from four), focus on inflation
Future Projections	Fewer rate cuts expected in 2026 and 2027, per BusinessWeek

This table highlights the Fed’s cautious approach, with the median rate projection for 2025 reflecting a more hawkish outlook compared to previous expectations.

Broader Implications

The Fed’s hawkish turn has significant implications for financial markets and economic policy. Investors, as noted by Yahoo Finance, are closely watching the dot plot for clues on rate cuts, with some anticipating the Fed might stick to two cuts but delay action due to inflation concerns. The focus on tariffs and their potential impact on inflation, as mentioned, adds another layer of complexity, with some analysts suggesting the Fed needs more time to assess these effects.

For businesses and consumers, higher rates for longer could mean increased borrowing costs, potentially slowing economic growth. However, the Fed’s dual mandate of price stability and maximum employment means it must balance inflation control with economic support, a delicate task given the current economic climate.

In conclusion, while the Federal Reserve projects two rate cuts in 2025, bringing the federal funds rate from 4.25%-4.50% to around 3.75%-4.00%, the overall stance has turned more hawkish. This is evidenced by the higher median projection for 2025 (3.6% vs. 3.4% in March), an increasing number of officials expecting no cuts, and a focus on inflation, reflecting a cautious monetary policy approach as of June 18, 2025.