- Fed Chair Powell will speak on the US economic outlook on Tuesday.
- Markets see a strong probability of two more Fed rate cuts in 2025.
Federal Reserve (Fed) Chairman Jerome Powell will deliver a speech on the economic outlook at the Greater Providence Chamber of Commerce 2025 Economic Outlook Luncheon on Tuesday at 16:35 GMT.
Following the September policy meeting, the Fed decided to cut the policy rate by 25 basis-points (bps) to the range of 4%-4.25%, as widely anticipated. The revised Summary of Economic Projections (SEP), also known as the dot-plot, showed that projections imply additional 50 bps of rate cuts in 2025, 25 bps in 2026 and 25 bps in 2027.
In the post-meeting press conference, Fed Chair Powell clarified that he doesn’t feel the need to move quickly on rates and called the decision to lower the rates a “risk management cut.” While he noted that it’s time to acknowledge that risks to the employment mandate have grown, he also added that they still expect tariff-driven price increases to continue this year and next.
The CME FedWatch Tool currently shows that markets are pricing in about a 75% probability of the Fed opting for two more 25 bps rate cuts this year. This market positioning suggests that the US Dollar (USD) has room on the downside in case Powell leaves the door open to a total of 50 bps reduction in rates, citing worsening conditions in the labor market.
On the other hand, the USD could stay resilient against its major rivals if Powell reiterates upside risks to the inflation outlook because of the uncertainty surrounding the impact of tariffs on prices, and adopts an optimistic tone about economic prospects. In this scenario, US Treasury bond yields could edge higher and Wall Street’s main indexes could come under bearish pressure.
Dot Plot FAQs
The “Dot Plot” is the popular name of the interest-rate projections by the Federal Open Market Committee (FOMC) of the US Federal Reserve (Fed), which implements monetary policy. These are published in the Summary of Economic Projections, a report in which FOMC members also release their individual projections on economic growth, the unemployment rate and inflation for the current year and the next few ones. The document consists of a chart plotting interest-rate projections, with each FOMC member’s forecast represented by a dot. The Fed also adds a table summarizing the range of forecasts and the median for each indicator. This makes it easier for market participants to see how policymakers expect the US economy to perform in the near, medium and long term.
The US Federal Reserve publishes the “Dot Plot” once every other meeting, or in four of the eight yearly scheduled meetings. The Summary of Economic Projections report is published along with the monetary policy decision.
The “Dot Plot” gives a comprehensive insight into the expectations from Federal Reserve (Fed) policymakers. As projections reflect each official’s projection for interest rates at the end of each year, it is considered a key forward-looking indicator. By looking at the “Dot Plot” and comparing the data to current interest-rate levels, market participants can see where policymakers expect rates to head to and the overall direction of monetary policy. As projections are released quarterly, the “Dot Plot” is widely used as a guide to figure out the terminal rate and the possible timing of a policy pivot.
The most market-moving data in the “Dot Plot” is the projection of the federal funds rate. Any change compared with previous projections is likely to influence the US Dollar (USD) valuation. Generally, if the “Dot Plot” shows that policymakers expect higher interest rates in the near term, this tends to be bullish for USD. Likewise, if projections point to lower rates ahead, the USD is likely to weaken.