What is the Fed dot plot?
In one line: The dot plot is a Fed chart where each official places one dot for where they think the key interest rate should be at the end of each coming year.
What it is
Four times a year, the Fed publishes its Summary of Economic Projections. It comes with the statement at 2:00 pm ET at the March, June, September and December meetings.
Inside is the dot plot. Each person at the FOMC table, up to 19 officials, adds one dot per year. The dot shows where they think the Fed funds rate should be at the end of that year. Dots are anonymous. Nobody's name is on them.
A simple example
Say the rate is 4.25%–4.50% today. For next year, the dots look like this:
- 3 dots at 4.375%
- 8 dots at 3.875%
- 6 dots at 3.625%
- 2 dots at 3.375%
The middle dot, the median, is the number headlines quote. Here it's 3.875%. That's about 50 Basis points below today, so the "typical" official sees two quarter-point cuts next year.
Why it matters
Markets compare the dots with what traders already expected. If the dots show fewer cuts than expected, that reads as hawkish news (see Hawkish and dovish). Yields may rise and the dollar may firm. More cuts than expected reads dovish.
That's why prices can jump at 2:00 pm on these days, then swing again at the 2:30 pm press conference. Our FOMC meeting guide walks through the whole day.
A common mistake
Reading the dots as a promise. They're each official's best guess on that day. They change as data changes, sometimes a lot within one year. The Fed itself says they aren't a plan.
Watch how the median shifts from one dot plot to the next. The change often tells you more than the level.
Questions
How often does the Fed release the dot plot?
Four times a year, with the March, June, September and December meeting statements.
Who puts dots on the dot plot?
The Fed's governors and the 12 regional Fed bank presidents. All of them submit a dot, even the presidents who don't vote that year.
Is the dot plot accurate?
Often not, further out. It's a snapshot of views that change as new data comes in.
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