Core Viewpoint - The Federal Reserve is experiencing a significant divide among its officials regarding interest rate decisions, with some advocating for no rate cuts while others support two cuts by the end of the year, indicating high uncertainty in policy direction [1][3]. Group 1: Federal Reserve's Rate Outlook - The dot plot from the Federal Reserve shows a split among 19 participants: 7 expect no rate cuts, 8 anticipate two cuts, and a few support one or three cuts [1][3]. - Barclays analysts predict only one 25 basis point cut in December 2023, with three cuts expected in 2026, bringing rates to a range of 3.25%-3.50% [2][5]. - The internal division stems from differing concerns: those favoring no cuts are worried about inflation risks, while those supporting cuts are focused on potential increases in unemployment and slowing economic growth [3][8]. Group 2: Economic Projections and Inflation - The latest economic projections indicate a downward revision in GDP growth forecasts, with 2025's real GDP growth expected at 1.4%, down from 1.7% [7][8]. - PCE inflation forecasts have been raised to 3.0% for 2025, with core PCE inflation at 3.1%, reflecting concerns over rising inflation risks [8][9]. - The unemployment rate is projected to rise to 4.5% in both 2025 and 2026, indicating a potential economic slowdown [7][8]. Group 3: Tariff Impact and Policy Caution - The report highlights the significant impact of tariff policies on the U.S. economic outlook, suggesting that high tariffs may lead to persistent inflationary pressures [6][9]. - Federal Reserve Chair Powell emphasized the need for caution, stating that the current policy stance is sufficiently restrictive to address various risks and uncertainties [10][11]. - Powell's remarks indicate a shift from viewing tariff impacts as temporary to recognizing their potential long-term effects on inflation and economic activity [11].