What is the Dot Plot
The Fed's quarterly forecast — and how to read between the dots
- Read a dot plot and identify the median + dispersion
- Tell hawkish dots from dovish dots from prior plots
- Predict FX reaction to a dot plot shift
Every quarter, 19 FOMC members each plot a dot for where they think rates should be at year-end. The picture they form moves currencies more than any single rate decision. The dot plot isn't policy — it's *expectations* — and expectations are what FX trades on.
What you're looking at
The dot plot shows each FOMC member's anonymous forecast for the fed funds rate at the end of each upcoming year. The median dot is what the market treats as the Fed's official forecast. The dispersion (how spread out the dots are) tells you how much disagreement there is internally.
Median dot moves higher than previous plot (e.g. from 4.25% → 4.75% for year-end). Means Fed expects to hold higher or hike more. USD rallies on widened yield differential.
Median moves lower. Fed expects to cut sooner/faster. USD weakens as the priced rate path shifts down.
Reading between the lines
Dispersion tells you conviction. Tightly clustered dots = strong consensus → high-confidence guidance. Wildly scattered dots = internal disagreement → lower confidence in the median. Markets discount wide-dispersion forecasts. Tail dots (the outliers) also matter — one hawk pulling the median up signals the *committee's* hawkish skew.
New dot plot: median for year-end stayed at 5.0% but dispersion widened sharply. Likely USD reaction?
- 19 dots, each a member's forecast for year-end rates
- Median dot = de facto Fed forecast
- Median shift hawkish/dovish vs prior = the trade signal
- Dispersion tells you how confident the committee is
Sign up to take the quiz
5 questions wait at the end of every briefing. Score 80%+ to complete the briefing, earn ranks, and track which fundamentals you've mastered.
Account is free. Quizzes are free. The 30-day refund applies if you ever upgrade to a paid plan and aren't satisfied.