MNI: Fed SEP Sticks To Two Cuts In 2025; Holds Rates Again

A divided Federal Reserve signaled Wednesday it is likely to cut interest rates twice this year as it opted to keep borrowing costs on hold for a fourth straight meeting against a backdrop of heightened uncertainty surrounding trade and fiscal policy.

The breakdown of the central bank's "dot plot" showed a wider divergence of views on the outlook than the median indicates. Seven officials believe no rate cuts will be needed at all this year. Two others see one cut, eight would like two cuts, while the remaining two members foresee three reductions.

"Uncertainty about the outlook has diminished but remains elevated," the FOMC said in its policy statement. Economic activity is expanding at a solid clip while the unemployment rate is low, the statement said in a repetition from the May meeting. 

Fed officials have indicated they are currently in a wait-and-see posture as rapid changes in trade, tax and immigration policy out of Washington are widely perceived to raise the risk of higher inflation and unemployment. 

The median of two cuts is the same as officials had penciled in as of the March Summary of Economic Projections. Policymakers also lifted their view of year-end core inflation to 3.1% from 2.8%, while downgrading their 2025 growth forecasts to 1.4% from 1.7%.

FOMC members also saw a median of one rate cut for 2026, down from two in the March SEP -- and in line with an upward revision in next year's inflation outlook as well.  
The Fed's long-run median rate projection was unchanged at 3.0%.

The Fed's forecast for unemployment at year-end 2025 rose slightly to 4.5% from 4.4%.