What the dot plot is
The dot plot is a chart in the Federal Reserve's Summary of Economic Projections (SEP). The SEP is a set of forecasts that the Fed releases after some FOMC meetings, not after every meeting. The FOMC (Federal Open Market Committee) is the group that sets the US policy rate, the federal funds rate.
Each FOMC participant, voting or not, places a dot on the chart. A dot shows where that person thinks the appropriate federal funds rate should be at the end of each year shown, and over the "longer run". The longer-run dot is each participant's view of the neutral rate, the level that neither speeds up nor slows down the economy.
The dots are anonymous. You cannot tell which dot belongs to the Chair or to a particular regional bank president.
The SEP also includes projections for GDP growth, unemployment, headline PCE inflation and core PCE inflation. The dots show the rate path that each participant thinks fits their own forecast for these measures.
- The central bank raises its policy rate, or signals that it will.
- Deposits and bonds in that currency start to pay more.
- Investors move money into the currency to earn the higher yield.
- The currency tends to strengthen; a rate cut usually works the other way.
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How to read the dots
The median
Most headlines report the median dot, the middle value when all dots for a year are ranked. Markets use the median as a rough summary of "where the committee sees rates going". Traders compare it with:
- the median from the previous SEP, to see whether the committee has turned more hawkish (favouring higher rates) or more dovish (favouring lower rates). See Hawkish vs dovish.
- the rate path already priced in futures markets.
Dispersion
The spread of the dots matters as much as the median. Tightly grouped dots mean the committee broadly agrees. Widely scattered dots mean disagreement, and the median can move a lot if only a few participants change their view.
Things experienced traders look at:
- Skew: are the dots above the median closer together than those below it, or the other way round?
- Shift in the cluster: did the whole group move, or only the outliers?
- Longer-run dots: a rise here suggests participants think the neutral rate is higher than before. That affects the long end of the yield curve.
Limits of the dot plot
The dot plot is not a promise or a policy decision. The Fed itself presents it as individual projections that depend on incoming data.
- Each dot assumes that participant's own "appropriate" policy and economic forecast. The dots are not a joint committee plan.
- Participants change over time, so the people behind the dots differ between releases.
- Projections further out have often turned out wrong once the economy changed.
- The median can hide a split committee.
- The chart is a snapshot on the meeting date. Data released afterwards, such as CPI or non-farm payrolls, can make it out of date quickly.
For this reason, many traders read the dots together with the policy statement, the press conference and forward guidance, not on their own.
How markets typically react
The dots are released with the FOMC statement, and the Chair's press conference follows shortly after. Typical patterns, which do not repeat every time:
- Treasury yields move first, especially short-dated ones, when the median path differs from market pricing. See Bond yields and FX.
- The US dollar tends to strengthen when the dots point to a higher path than expected and to weaken when they point lower. The US Dollar Index is a common gauge.
- Gold often moves against real yields. See What moves gold.
- Stock indices can react to the implied cost of money. See What moves indices.
The first move can reverse during the press conference if the Chair plays down the dots. Spreads can widen and prices can gap around the release. Leveraged forex and CFD trading can lose money fast in these conditions. Read Risk management before you trade any central bank event.
Where to find release dates and data
Take release dates only from the Federal Reserve's official FOMC calendar. It marks which meetings include an SEP. An economic calendar can show the same events, but check them against the Fed's own schedule.
Take the dots and projection tables from the SEP document the Fed publishes on its official website. Do not use copies on social media. For background on the institution, see US Federal Reserve and Interest rates and currencies.
Frequent questions
Is the dot plot released at every FOMC meeting?
No. It comes with the Summary of Economic Projections, which is released only at some meetings. The official FOMC calendar marks which ones.
Does the median dot mean the Fed will set rates there?
No. It is the middle of individual projections, and each one depends on data. Actual decisions often differ from earlier dots.
Why does dispersion matter if headlines only quote the median?
A wide spread shows disagreement inside the committee. When the dots are scattered, the median can shift sharply between releases.
What is the longer-run dot?
It is each participant's estimate of the neutral federal funds rate, the rate expected once the economy is in balance.
Can I trade the dot plot release safely?
No trading around this release is risk-free. Volatility and spreads can rise sharply, and leveraged positions can lose money quickly.
