- Across the board, Federal Reserve officials’ forecasts for the U.S. economy worsened in its latest report summarizing their expectations. They expected growth to slow and inflation to rise save for one official, who expected GDP growth would incline between 2.4% and 2.5%.
The Federal Reserve has an optimist in its midst.
When the central bank released its latest round of economic projections on Wednesday, one Fed official had a decidedly more positive outlook for U.S. growth compared to their colleagues.
The unnamed official was an outlier among the rest of the Federal Open Market Committee, projecting U.S. GDP growth of between 2.4% to 2.5% over the next two years. No other committee member expected it to even reach 2%.
The report, officially known as the Summary of Economic Projections, but colloquially referred to as the “dot plot,” is a quarterly roundup of what Federal Reserve officials expect from the U.S. economy over the next several years. Investors and economists carefully monitor the dot plots when they’re released to assess any changes to the Fed’s outlook on the economy.
The most recent dot plot saw consensus forecasts among the Fed’s leadership fall compared to those from its previous version in December. In that report, 13 committee members had expected more than 2% GDP growth from 2025 to 2027. Six expected growth between 2% and 2.1%, and another six expected it to be a tick higher at 2.2% to 2.3%. One official back in December also expected 2.5%.
Because the dot plot is anonymous it’s not possible to say whether the same committee member from December had the same positive outlook this time around.
In general, expectations moved in a relatively bleak direction. Growth forecasts fell, while inflation and unemployment projections rose. “Officials saw a clear shift in risks towards weaker growth and higher inflation as well,” Deutsche Bank wrote in an analyst note after the Fed’s meeting.
The Fed’s median forecast for GDP growth dropped from from 2.1% to 1.7%, according to the March dot plot. When addressing that change, Federal Reserve chair Jerome Powell termed it a “meaningful decline in growth,” during a press conference Wednesday.
Though Powell reiterated—as he has throughout the year—that the economy remains on solid footing overall. The declines in growth projections were mostly due to high levels of uncertainty, he added.
Most of that uncertainty stems from two policy proposals from President Donald Trump: his on-again, off-again tariff policy, and his pledge to enact a hardline immigration policy. Both policies could hurt the economy by igniting a trade war and reducing the labor supply, respectively. So far, the Trump Administration has made dizzying moves on tariffs, a critical part of its unconventional trade policy. After implementing sweeping tariffs on China, the world’s second largest economy,Trump also instituted and then subsequently reversed tariffs on Mexico and Canada. A new round of tariffs is set to go into effect April 2, which has also done little to offer investors the clarity they seek.
The lack of details about the nature of the tariff policies makes it difficult to assess their impact beyond the broad strokes. “There’s so many things we don’t know,” Powell said Wednesday. “But we kind of know there are going to be tariffs and they tend to bring growth down, they tend to bring inflation up in the first instance.”
Forecasts from investors also matched the Fed’s consensus—but not that of its lone optimist.
“We have lowered our 2025 GDP forecast given a surge in policy uncertainty and have raised our core inflation forecast amid upward pressure on goods prices and anticipated impacts from tariffs,” Vanguard wrote to investors in an email Thursday morning.
The broad uncertainty about what policies would be implemented and how they would impact the economy has been one of the deciding factors in the Fed’s decision to pause interest rate cuts so far this year. On Wednesday, Federal Reserve chair Jerome Powell reiterated that the central bank was in no rush to change interest rates. He said the economy was on solid enough footing that the Fed could afford to wait for more clarity about the White House’s future policies.
That reality is shifting the balance of power within the government.
“We are facing a regime change from a monetary policy-dominant world to a fiscal policy dominant one,” wrote William Blair equity researcher Richard De Chazal.
