The Fed's dot plot: definition
The chart the Fed publishes four times a year, where each FOMC participant places a dot for the rate they judge appropriate at the end of each year. The median of the dots serves as the reference path.
What the chart shows
The dot plot is part of the economic projections (Summary of Economic Projections) the Fed publishes at four meetings a year: March, June, September and December. Each FOMC participant, voting that year or not, places an anonymous dot at the fed funds rate they judge appropriate at the end of each coming year, then in the longer run.
When all seats are filled, there are 19 dots per year: the seven governors and the twelve regional Fed presidents.
How to read it
The figure the press reports is the median, the middle dot. It gives a reference path: how many cuts or hikes the committee envisages by year end.
Dispersion matters just as much. Tight dots indicate a committee in agreement; dots spread over a percentage point signal uncertainty that will make the following meetings more open. The “longer run” dot is the committee's estimate of the neutral rate.
Why the market reacts to it
What moves the dollar is the gap between the median and what fed funds futures had priced in. A median that removes an expected cut is read as hawkish, even if today's rate doesn't change.
The Fed itself points out that these dots aren't a commitment: they are individual projections, revised every quarter.
Frequently asked questions
- When is the dot plot published?
- At 2 pm New York time, usually 8 pm in Paris, on the day of the March, June, September and December decisions, with the FOMC statement.
- Are the dots attributed by name?
- No, they are anonymous. A dot can sometimes be guessed from speeches, but the Fed doesn't publish who placed what.
This page explains a concept; it is not investment advice. Leveraged currency trading carries a high risk of losing capital.
