The FOMC dot plot: the Fed's map of where rates go next

The lesson in plain words

The same lesson as the slides above, written out in full.

1. The FOMC Dot Plot

Welcome. Four times a year, when the Federal Reserve meets, it publishes a chart that markets absolutely pore over. It is officially part of the Summary of Economic Projections, but everyone just calls it the dot plot. On it, each anonymous dot marks where one member of the committee expects interest rates to sit at the end of this year, next year, and beyond. Read together, those scattered dots give you the clearest picture available of where the Fed, collectively, thinks it is heading with policy. One note before we begin. This is financial education only, not financial advice.

• Four times a year, the Fed publishes the dot plot.
• Each dot marks where one official expects rates to be.
• Markets pore over it for the Fed's expected path.

A quick note: This is financial education only, not financial advice. Do not buy, sell, or hold anything based on this lesson.

2. A Chart of Expectations

So how do you read the chart? It is laid out as a grid. Each column represents a future period, the end of this year, next year, the year after, and a longer run estimate. Within each column, every dot is one committee member's projection for rates in that period, and they are kept anonymous, so you cannot tell whose dot is whose. The spread of the dots matters too. When they cluster tightly together, the committee is in strong agreement. When they scatter widely, there is genuine disagreement about the path ahead. But the single number everyone focuses on is the median dot, the one in the very middle, because that best represents the committee's central expectation.

• Each column is a future period: this year, next, and the longer run.
• Each dot is one committee member's projection, kept anonymous.
• The spread of the dots shows how much they agree.
• The median dot, the middle one, is the headline the market reads.

3. The Path, Not Just the Level

Why does a chart of dots move markets so much? Because it reveals the expected path of interest rates, not just where they sit today. Markets are forward looking, so what the Fed expects to do over the next two years matters enormously for how everything is priced. If the median dot shifts higher than at the previous meeting, it points to higher rates for longer, which pressures equities, especially growth names. If the median dot shifts lower, it points to coming rate cuts, which markets often cheer. The biggest reactions come not from the dots themselves, but from how they have moved compared to the last set, three months earlier. A hawkish shift in the dots can jolt every market at once.

• The dot plot reveals the expected path of rates, not just today's level.
• If the median dot moves up, it points to higher for longer, pressuring stocks.
• If it moves down, it points to coming cuts, which markets often cheer.
• The big moves come when the dots shift versus the last time.

4. A Projection, Not a Promise

Now for the essential caveat, the one that separates a naive reader from a sharp one. The dot plot is a projection, not a promise. It is a snapshot of what officials expect, based on the information they have today. It is not a commitment, and the Fed is in no way bound to follow it. Chair Powell himself regularly reminds everyone of this. As new data arrives, hotter inflation, a weaker jobs market, the dots simply move at the next meeting. Over the years, the dots have often proved quite wrong about the eventual path of rates. So read the dot plot as the Fed's honest best guess right now, a genuinely useful read on their thinking, but never as a fixed schedule you can bank on.

• The dot plot is a snapshot of expectations, made on today's information.
• It is not a promise or a plan; the Fed is not bound by it.
• As the data changes, the dots move at the next meeting.
• So read it as the Fed's best current guess, not a fixed schedule.