9:26 a.m. ET, March 20, 2024
What’s a dot plot?
The Federal Reserve’s quarterly Summary of Economic Projections includes a chart that is colloquially known as the dot plot. which shows (in a series of dots) where each of the central bank’s 19 officials expect interest rates to go in the future.
It’s of particular interest this time around because if the Fed has shifted its thinking about when to lower interest rates, it will come through in this chart.
Investors pay close attention to these forecasts for information about the path of rate hikes. When there’s a shift in the plot, it tells investors that the Fed could plan a change in how they’re approaching rates.
The official policy statement from the Federal Reserve represents a consensus among the voting policy members, but this extra data allows investors to look under the hood and see what’s going on behind the scenes.
That’s important because if just two Fed officials turn slightly more hawkish, “the forecast for three rate cuts in 2024 would shrink to two, upsetting this timetable and markets at the same time,” said David Kelly, chief global strategist at JP Morgan Asset Management, in a note this week.
The plot can also underscore the difference between what investors think will happen and what the Fed thinks will happen. So if the Fed projects fewer rate hikes ahead, that will likely send bond yields higher and markets lower.
