How to read the Fed’s projections like a pro.

Since then, inflation has surged to a three-year high, and the labor market has stabilized. Just days before the June meeting, the United States struck a tentative deal with Iran to end the conflict, causing oil prices to drop sharply.

The Fed also has a new chairman, Kevin M. Warsh, who was sworn in a few weeks ago. Mr. Warsh, who served as a governor at the Fed during the global financial crisis, is an avowed critic of the dot plot. He has argued that these forecasts make it harder for the central bank to stay nimble when the economic backdrop shifts.

Here’s what could change in the forecasts on Wednesday and how to interpret those updates.

The dot plot, decoded.

When the central bank releases its Summary of Economic Projections each quarter, Fed watchers focus on one part in particular: the dot plot.

It will show Fed policymakers’ estimates for interest rates through 2028 and beyond. The forecasts are represented by dots arranged along a vertical scale — one dot for each of the Fed’s 19 officials. While only 12 cast a vote at each meeting, all 19 can submit forecasts for rates and the economic outlook over the short and long terms.

One focal point of the June meeting is whether Mr. Warsh will submit his own projections. Many economists expect him to opt out given his opposition to the whole exercise. But others warns that to do so could create tension with his new colleagues.

Economists closely watch how the dots shift for hints about where policy is heading. They fixate on the middle, or median, dot. It is regularly cited as the clearest estimate of where the Fed sees rates going over a given period.

The forecasts should be viewed cautiously. The dot plot does not represent a preset plan for policy, but rather a compilation of officials’ projections at a moment in time. It can be a helpful communications device. But when the economic outlook is uncertain, it can muddy the Fed’s message.

The central bank is trying to achieve two goals when it sets policy: low, stable inflation and a healthy labor market.

When it perceives elevated inflation to be a concern, it raises rates to make borrowing money more expensive, which cools the economy. When the economy is sluggish and in need of support, the Fed does the opposite and lowers rates to stoke demand.

Any changes to the 2026 rate outlook will be closely monitored. With or without Mr. Warsh’s forecast on Wednesday, most officials are poised to scale back their expectations for rate cuts from estimates three months ago. The median estimate is expected to at least show no cuts by year-end rather than the quarter-point reduction that was previously forecast. Some officials are likely to pencil in at least one rate increase, reflecting what is expected to be a significant revision higher in the inflation forecast.

How restrictive are interest rates?

When you read the dot plot, it’s important to pay attention to where interest rate estimates fall in relation to the longer-run median projection. That number is sometimes called the “natural” or “neutral” rate. It represents the theoretical dividing line between monetary policy that is set to speed up the economy and a policy meant to slow it down.

The neutral estimate has ticked higher in recent years, and in March stood at 3.1 percent. Officials at the Fed maintain that rates at the current range of 3.5 percent to 3.75 percent are only marginally weighing on the economy.

How Mr. Warsh perceives the Fed’s current policy settings will be crucial to understanding his appetite for lower rates.

How sticky will inflation be?

Officials on Wednesday are expected to sharply revise higher their forecasts for inflation in light of the war with Iran. In March, just weeks after the onset of the conflict, policymakers expected “core” inflation, which strips out volatile food and energy items, to rise to only 2.7 percent by the end of the year.

As of April, this measure of underlying inflation, according to the Fed’s preferred Personal Consumption Expenditures price index, stood at 3.3 percent. Overall P.C.E. inflation has shot higher to 3.8 percent.

An end to the conflict in the Middle East will help to ease inflationary pressures, but it will not eliminate them. Officials are most concerned about Americans losing faith that inflation will eventually return to 2 percent, the Fed’s longstanding target.

The longer officials miss on their target — as they have done for five years — the more pronounced that risk becomes.

Article source: https://www.nytimes.com/live/2026/06/17/business/fed-meeting-warsh-interest-rates/how-to-read-the-feds-projections-like-a-pro