Forex Fundamentals
Central Banks in Forex

The Fed Dot Plot Explained

By Rutger Lokin · Updated

The dot plot, explained in one line: every Federal Reserve policymaker puts a dot where they think the Fed’s interest rate should be at the end of this year and each of the next few. Put the dots side by side and you see how the people who set US rates picture the road ahead.

The Fed meets eight times a year, and four of those meetings come with a dot plot: March, June, September and December (FOMC calendar). It is published with the rate decision, inside a document called the Summary of Economic Projections, or SEP. The recent decisions and the date of the next one are on Fed Interest Rate Decision (FOMC).

Who gets a dot

Everyone at the table, whether they vote that year or not. That is the seven governors in Washington and the twelve Reserve Bank presidents, nineteen people when every seat is filled, though only twelve of them vote (About the FOMC). Who they are is on the Federal Reserve’s page.

A vacancy means a dot fewer. In September 2026 there were 18, and one participant left 2028 and 2029 blank (September 2026 SEP). The dots carry no names, so you cannot tell which one is the Chair’s.

Each dot is one person’s view of the right policy, given their own forecast for the economy. Nobody voted on the chart. Jerome Powell said it plainly at his press conference in June 2021: “These are, of course, individual projections. They’re not a Committee forecast, they’re not a plan.” (press conference transcript)

Turning dots into hikes and cuts

A dot is the midpoint of the target range the participant thinks is right at the end of that year. The Fed sets a range a quarter point wide, so a dot at 0.875% stands for 0.75–1.00%. The SEP table prints it as 0.9%.

That bit of arithmetic is how you read the chart. Say the range today is 4.25–4.50%, midpoint 4.375%. A median of 3.9% for the end of next year means 3.875%: two quarter-point cuts. A median of 3.4% means four.

What to look at first

  • The median dot for each year. It is the middle one, and it is the number in the headlines.
  • How it changed since the last SEP. A median that moved is news. One that stayed put is news only if the market expected it to move.
  • The spread. A tight cluster means the committee agrees. When the dots split almost evenly between two levels, one changed mind can move the median a quarter point next time.
  • The longer-run dot. Where each participant expects the rate to settle under the right policy once the shocks have passed. Take away the 2% inflation goal and you have roughly the real rate they think is neutral. While the policy rate sits above the longer-run dot, the committee is, by its own reckoning, leaning on the economy. Real rates per currency are on real interest rates.

The same document projects growth, unemployment and PCE inflation. Read them with the dots. If the median dot rises along with the inflation projection, you know what pushed it.

When two hikes appeared in three months

In March 2021 the median for the end of 2023 was 0.1%, the floor where the rate already was. Seven participants had a dot above it (March 2021 SEP).

Three months later the median for 2023 was 0.6%: two hikes. Thirteen participants now had a dot above the floor (June 2021 SEP). The rate itself had not moved, and Powell told reporters the dots should be taken with “a big, big grain of salt”. The level was still close to zero. The change was the news.

Why the dots move the dollar

Currencies trade on where rates are expected to go more than on today’s rate. Before each meeting that path is already priced in fed funds futures and overnight index swaps.

A median above what is priced is a hawkish surprise. Short-dated yields tend to rise and the dollar tends to firm. A median below what is priced works the other way.

So the level of the dots tells you little on its own. Compare the median with the last SEP and with the market’s pricing. In a hiking cycle, the highest median on the chart is the committee’s own view of the terminal rate. How the Fed’s rate compares with the others’ is on Interest rate differential by currency pair.

The median is not a forecast

In December 2021 the median for the end of 2022 was 0.9%, three quarter-point hikes. The same participants put 2022 PCE inflation at 2.6% (December 2021 SEP).

A year later the FOMC raised its range to 4.25–4.50% (FOMC statement), and the projection for 2022 inflation had become 5.6% (December 2022 SEP). The rate ended the year three and a half points above the median dot, with inflation at more than twice what the committee had expected.

December 2021 was not a one-off. Take all 52 dot plots from January 2012 to December 2024 and set each median for the end of the following year against the midpoint of the range the Fed actually had on 31 December (the SEPs, and the target range on FRED). On average the median ended 0.88 of a percentage point away, three and a half quarter-point moves.

It was too high 24 times and too low 15. It was exactly right 13 times, and 12 of those came while the rate sat at the floor and stayed there. The widest gaps followed shocks that nobody had drawn in. In March 2019 the median for the end of 2020 was 2.6% (March 2019 SEP), and the pandemic took the rate to 0–0.25%. In March and June 2021 it was 0.1% for the end of 2022, and 2022 ended at 4.25–4.50%.

So read the median as where the committee stands today, and its change since the last SEP as the news. Where the rate ends up a year later is another matter.