Dot Plot

The dot plot is the chart in the Fed’s quarterly Summary of Economic Projections showing where each FOMC participant thinks the fed funds rate should be at the end of the current year, the next two or three years, and over the longer run. Each anonymous dot is one policymaker’s view; the market fixates on the median.

It matters because it is the Fed’s own forward guidance in numeric form, released only four times a year (March, June, September, December) alongside the rate decision. The knee-jerk trade at 2:00 p.m. ET on SEP days is usually the gap between the median dots and what futures had priced: a “hawkish dot plot” means the dots imply fewer cuts (or more hikes) than the market expected.

• The longer-run dot is the committee’s estimate of neutral; its slow drift upward in the mid-2020s repriced the whole curve.
• Dots are projections, not promises. Chairs routinely downplay them, and the market routinely ignores the downplaying.

Worked example: Going into a June SEP, futures price 75bp of cuts by year-end. The new median dot shows only 50bp, and the longer-run dot ticks from 3.0% to 3.125%. Within minutes the 2-year yield jumps 9bp, 2s10s flattens 4bp, and equities dip: a textbook hawkish-dots reaction.