Fed Dot Plot Reveals Diverging Views on Policy Path Ahead

While the first rate cut in three years announced on Wednesday was widely expected, perhaps the more interesting piece of information to come from this week's FOMC meeting was the so called dot plot, i.e. the graphic depiction of each committee member's opinion on where the Fed's policy rate should be at the end of this year, next year and beyond. As opposed to the official Fed projection for each year, which is the median value of the participating committee members' individual projections, the dot plot also tells us something about the divergence of opinions within the group. In this case, it was quite significant, with the dots for 2028 and 2029 in particular quite scattered - a sign of high uncertainty with respect to the right interest rate path ahead.

Looking at the remainder of 2026 and the next year, most FOMC members are mostly on the same page, expecting one or two more 25 point hikes by the end of 2027, with 12 members anticipating another hike this year and another four expecting two upward corrections in this year's two remaining meetings. It is in the forecast for 2028 where opinions really start to diverge, with projections ranging from a target level of 3.125 by the end of 2028, as four committee members predict, to 4.125, also predicted by four officials. Median projections for 2028 and 2029 suggest that the Fed's policy rate will only slowly move towards the 3-percent level that is considered neutral.