Dot Plot

A chart published quarterly by the Federal Reserve showing where each governor expects interest rates to be over the next few years.

The dot plot is a chart published quarterly by the Federal Reserve that summarizes the outlook of the members of the Federal Open Market Committee (FOMC) regarding the future path of interest rates. Each dot represents an anonymous official's projection for the federal funds rate at the end of the next few calendar years and in the longer run. Investors watch the dot plot closely because it provides a visual guide to the central bank's collective expectations for monetary policy. A shift in the dots upward indicates a more hawkish stance (higher rates for longer), while a shift downward suggests a more dovish outlook (rate cuts ahead). To interpret the dot plot, market participants focus on the median dot for each year. If the median dot for the upcoming year rises compared to the previous quarter's plot, it suggests the Fed is leaning toward tightening monetary policy faster than previously anticipated.

In its September meeting, the Fed releases a dot plot where the median projection for the next year's interest rate rises from 4.25% to 4.75%. The market interprets this as a signal that the Fed plans to implement two additional 25-basis-point rate hikes (0.25% x 2 = 0.50% increase), causing bond yields to rise.