As was widely expected, the Federal Reserve announced last week that it was leaving short-term interest rates unchanged. Thus, the target range of the federal funds rate stands at 4.25 percent to 4.5 percent, as it has since last December. With economic uncertainty running high, the FOMC, the Fed’s interest rate setting body, has adopted a wait-and-see approach as competing shocks threaten its ability to balance its dual mandate of maintaining price stability and full employment. Recent data has provided little direction. Inflation remains elevated but earlier fears of a tariff-fueled surge have not so far been borne out. Meanwhile, employment figures point to a weakening, but hardly contractionary, labor market environment.

The FOMC’s latest interest rate projections released in conjunction with the June rate decision reflect this tension. The so-called “dot plot” identifies each of the 19 FOMC members’ assessment of what they deem likely to be the appropriate level of the federal funds rate at various points in the future.

Although the median projection, which has rightly received the most media attention, implies a cumulative cut of half a percentage point by the end of the year, the dispersion of projections belies the notion of a clear consensus. Seven FOMC members believe the appropriate rate at year-end will be exactly the same as now—4.25 percent to 4.5 percent. Two members believe it will be a quarter-point lower, 8 (including the median member) believe it will be a half-point lower, and two believe it will be three-quarters of a points lower.

Since the conclusion of the June meeting, two voting members of the FOMC have stated that they would consider supporting a rate cut as soon as the next meeting late next month. According to CME Fed Watch, which estimates the level of the federal funds rate based on financial market trading of interest rate derivatives, there is currently only a 25 percent chance of a quarter-point cut in July, but a nearly 90 percent chance at the following meeting in September. Looking out a bit further, CME Fed Watch estimates a 75 percent chance that by October the federal funds rate will be a half-point lower than it is now and a nearly 50 percent chance that it will be three-quarters of a point lower by year-end.

All things considered, it appears that the federal funds rate is heading lower. Eventually. Exactly when and by how much remains to be seen.