The Fed’s dot plot shows one member wants to cut rates like crazy by the end of the year

• The Federal Open Market Committee cut rates by a quarter percent due to slow job growth.
• The Fed’s projections show the median member expects another two cuts this year.
• But one participant wanted the equivalent of five cuts over the next two meetings.

One of these dots is not like the other.

The Federal Open Market Committee announced a rate cut Wednesday, its first policy change of the year. The quarter-point reduction is in alignment with expectations and a reaction to slow growth in the job market and stubborn inflation.

Alongside the rate cut, the Fed released the FOMC members’ economic projections for the next few years, including where they project interest rates to end up. The median member expected another half percentage point of reductions by the end of the year — or one normal-sized quarter-percent cut at each of the two remaining Fed meetings.

But one member called for something more ambitious, outlining a full 1.25 percentage points of cuts, or the equivalent of five typical cuts.

If the Fed were to move forward with that member’s suggested cuts, it would require multiple exceptionally large moves through the rest of the year, which are typically reserved for major economic downturns.

In addition to the strong downward outlier, one FOMC member projected that rates would be back above 4.25% by the end of 2025. That would mean walking back Wednesday’s rate cut and actually hiking rates by a quarter percent from where they stand.

The central bank said it continues to make rate decisions based on key markers of economic health, like the unemployment rate, nonfarm payroll job growth, inflation, and GDP. The committee members have a dual mandate to maintain stable prices and promote maximum employment, a goal that has been especially difficult in recent months.

At Wednesday’s press conference, Powell said he would expect some differing opinions among Fed members because they may have differing priorities for the dual mandate.

“It’s natural,” Powell said. “I think it would actually be surprising if you didn’t have a wide range of views in this highly unusual situation, and we do.”

How the ‘dot plot’ reflects The Fed’s economic outlook

The “dot plot” outlines economic projections by each member of the Fed. Taken together, the plot gives a window into where monetary policy could be headed in the short and long term.

Specific committee members are not named alongside their projections.

Powell said the latest job growth revisions gave the Fed “a very different picture of the risks of the labor market” and could warrant future policy changes.

The Fed chair has also been under pressure from the Trump Administration and fellow Fed leaders to cut rates in September — and continue lowering rates. Fed Governors Michelle Bowman and Christopher Waller dissented to July’s hold call, and new member Stephen Miran dissented to Wednesday’s call, preferring a half-percentage-point cut.

Powell said there was no united support for a bigger cut in September.

“There wasn’t widespread support at all for a 50-basis point cut today. We’ve done very large rate hikes and very large rate cuts in the last five years. You tend to do that when policy is out of place and needs to move quickly to a new place.”

He added that he is open to discussing bigger cuts with the committee in the future, and he doesn’t regret his previous restrictive policy strategy. Any decisions from the committee will be solely based on in-the-moment economic data, he said.

“That’s really all that matters and that’s how it’s going to work,” he said. “That’s in the DNA of the institution that’s not going to change.”

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