It’s almost certainly the most closely scrutinized scatter chart in financial markets. Every three months since January 2012, the Federal Reserve has sent analysts scurrying by updating its “dot plot,” which has become the de facto interest rate forecast of the US central bank — whether the Fed wants it to be or not. It’s also an important if cryptic source of clues to any dissent among Fed policymakers.
The dot plot is a chart showing estimates of where the federal funds rate, the short-term interest rate controlled by the Fed, should go in coming years. Members of the rate-setting Federal Open Market Committee each assign a dot for what they view as the midpoint of the rate’s appropriate range at the end of each of the next three years and over the longer run. Investors focus on the median dot. As many as 19 interest rate policymakers — the seven governors on the Fed Board in Washington and the presidents of the 12 regional banks — can contribute to the dots.