The Federal Reserve, ever the cautious oracle, has once again unveiled its “dot plot,” a mystical chart attempting to divine the future of interest rates. The latest iteration, however, paints a picture of a central bank more divided than ever, navigating a “very foggy time” as Fed Head Jerome Powell put it. Despite any internal wrangling, the consensus still points to two rate cuts by the end of 2025, a forecast that remains unchanged from their March outlook.

The Fed held its benchmark interest rate steady at 4.25%-4.5% for the fourth consecutive meeting, a decision that surprised no one. This follows a 0.25% cut back in December, a lone act of easing in what has otherwise been a holding pattern.

But the accompanying Summary of Economic Projections (SEP) tells a more nuanced story. Inflation and unemployment projections for the end of the year have been nudged upwards, while the forecast for economic growth has been trimmed. This recalibration suggests a central bank grappling with persistent economic headwinds.

While the median projection for the fed funds rate remains at 3.9% for this year, mirroring the March outlook, the underlying sentiment has shifted. A significant seven members of the Federal Open Market Committee (FOMC) now foresee no change in rates for 2025, a marked increase from the four who held this more hawkish view in March.

Furthermore, two officials anticipate only a single rate cut this year, underscoring the growing divergence. Only twelve officials are still predicting a rate cut by year-end, with a brave two even seeing a decrease of more than half a percentage point.

This widening chasm within the committee was openly acknowledged by the chairman himself, who attributed it to differing interpretations of data and risk assessment. “People can look at the same data and evaluate the risks differently,” he explained, alluding to the varying concerns about higher or more persistent inflation versus a weakening labor market.

It’s a classic case of economists seeing the same numbers but drawing vastly different conclusions – a fascinating spectacle, for those of us observing from the sidelines.

Adding to the complexity are some external uncertainties. The updated forecasts implicitly suggest the Fed’s cautious approach is influenced by the shifting trade policies of the current administration and potential ramifications of its proposed tax changes. These “policy unknowns” are clearly casting a long shadow over economic projections, among others.

Perhaps most concerning, however, is the escalating fear of stagflation. This dreaded economic cocktail – characterized by stagnant growth, persistent inflation and rising unemployment – has been brewing since the start of the year, and the Fed’s latest projections seem to underscore this unsettling sentiment.

While the dot plot still points to two rate cuts, the increasingly divided opinions within the Fed, coupled with the backdrop of economic stagnation and inflationary pressures, suggest that the path ahead for monetary policy is anything but clear. Investors, as always, would do well to remain nimble and skeptical of any definitive pronouncements in such a “foggy time.”