Federal Reserve officials have upgraded their economic projections, expecting unemployment and inflation to rise higher than previously thought. The central bank now sees an unemployment rate of between 4.4% and 4.5% this year, with forecasters predicting it will stay around 4.5% in 2026 and 2027.
Inflation is also expected to increase, reaching a median PCE inflation rate of 3% in 2025, higher than the initial forecast of 2.7%. However, officials remain cautious about cutting interest rates, citing substantial ongoing uncertainty and a solid labor market that supports keeping interest rates high.
The Federal Open Markets Committee’s economic projections show a divided view on interest rate cuts, with some members predicting no changes and others expecting a half-percent reduction in interest rates this year. The median forecast suggests a 50 basis point cut, but overall, the results indicate that officials are waiting for better conditions before reducing interest rates.
Despite inflation approaching its annual target of 2%, the Fed has chosen to maintain current interest rate levels, with rates ranging from 4.25% to 4.50%. This decision reflects the Fed’s wait-and-see approach, taking into account both the labor market and economic growth.
Source: https://www.investopedia.com/dot-plot-june-2025-11757391