🏛️ Dot plot signals slightly slower rate cuts than expected
The Federal Reserve did not surprise investors and decided to leave interest rates unchanged at 4.25%–4.5%. More importantly, however, the Fed revised its economic projections, pointing to slower GDP growth, slightly higher unemployment, and slightly higher inflation compared to the March forecasts.
- Futures markets are still pricing in around 50 basis points of monetary policy easing in 2025 — equivalent to two rate cuts — despite higher rate projections ("dots") for 2026–2027.
- The probability of a rate cut in September has risen to about 71%, and in October to around 85%.
- The rise in rate projections for 2026–2027 suggests that if inflation proves persistent (or if tariffs impact prices), the Fed is prepared to slow the pace of cuts, not accelerate them.
- The unemployment rate at the end of 2025 is projected at 4.5%, just half a percentage point above current levels — not a sign of recession yet, but it gives the Fed room to maintain a restrictive stance if prices fail to fall.
- The core PCE inflation forecast for next year is 3%, meaning actual disinflation in services will be critical before monetary policy can be meaningfully eased.
The dot plot appears hawkish, as even though the median expectation still shows two cuts in 2025, there is a hawkish shift in 2026/2027 (one cut removed compared to March’s projection).
For 2025, seven Fed officials now see no rate cuts (compared to four in March), and two forecast just one cut (compared to four previously).
Start investing today or test a free demo
Create account Try a demo Download mobile app Download mobile app
Source: Federal Reserve
US100
We’re seeing a moderate market reaction. Risk assets are edging lower following the decision and the release of the new projections. However, the declines are not significant, and the market is now awaiting remarks from Fed Chair Jerome Powell.
The content of this report has been created by XTB S.A., with its registered office in Warsaw, at Prosta 67, 00-838 Warsaw, Poland, (KRS number 0000217580) and supervised by Polish Supervision Authority ( No. DDM-M-4021-57-1/2005). This material is a marketing communication within the meaning of Art. 24 (3) of Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (MiFID II). Marketing communication is not an investment recommendation or information recommending or suggesting an investment strategy within the meaning of Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC and Commission Delegated Regulation (EU) 2016/958 of 9 March 2016 supplementing Regulation (EU) No 596/2014 of the European Parliament and of the Council with regard to regulatory technical standards for the technical arrangements for objective presentation of investment recommendations or other information recommending or suggesting an investment strategy and for disclosure of particular interests or indications of conflicts of interest or any other advice, including in the area of investment advisory, within the meaning of the Trading in Financial Instruments Act of 29 July 2005 (i.e. Journal of Laws 2019, item 875, as amended). The marketing communication is prepared with the highest diligence, objectivity, presents the facts known to the author on the date of preparation and is devoid of any evaluation elements. The marketing communication is prepared without considering the client’s needs, his individual financial situation and does not present any investment strategy in any way. The marketing communication does not constitute an offer of sale, offering, subscription, invitation to purchase, advertisement or promotion of any financial instruments. XTB S.A. is not liable for any client’s actions or omissions, in particular for the acquisition or disposal of financial instruments, undertaken on the basis of the information contained in this marketing communication. In the event that the marketing communication contains any information about any results regarding the financial instruments indicated therein, these do not constitute any guarantee or forecast regarding the future results.
