Explained | What the Federal Reserve’s latest 'dot plot' tells us about interest rates trajectory

The US Federal Reserve’s “dot plot” is one of the most closely watched charts in global markets, providing a snapshot of policymakers’ expectations for future interest rates. The chart is published quarterly as part of the central bank’s Summary of Economic Projections (SEP).

What is the dot plot?

Each dot on the chart represents a forecast from each member of the Federal Open Market Committee (FOMC) for where they see the federal funds rate at the end of the current year, the next two years, and in the longer run. The dots are anonymous and not tied to individual members. A cluster of higher dots signals that the Fed expects rates to stay elevated or rise, while lower dots suggest potential rate cuts.

What

does the September “dot plot” indicate?

After announcing their latest rate decision, officials shared their updated “dot plot”(a chart showing each member’s prediction for future rate changes). Most expect two more rate cuts before the year ends, according to a report on CNBC, with opinions varying widely.

One dot, possibly from Miran, who strongly supports lower rates, suggests a big drop of 1.25 percentage points, the report added. The chart doesn’t name anyone, but each dot represents one person’s view.

The CNBC report further indicated that out of 19 members:

– 10 expect two more cuts, likely in October and December

– 9 expect just one more cut

– 1 doesn’t want any cuts at all, not even the one just made

Why it matters for markets

Investors closely track the dot plot as it offers clues on the Fed’s policy stance and can move asset prices across the board. A more “hawkish” plot, with dots above market expectations, tends to push bond yields and the dollar higher while weighing on equities. A “dovish” plot does the opposite.

At tonight's FOMC meeting, the SEP will draw particular scrutiny because traders are already pricing in a total of 148 basis points of easing by the end of 2026 - about three rate cuts in 2025 and three more in 2026.

In June, the Fed projected a slower path, with only two cuts penciled in for 2025 and one for 2026. Policymakers are expected to align more closely with market pricing for 2025 but could take a more hawkish stance on 2026, signaling just one or two cuts.

Even so, the dot plot is not a binding commitment. It reflects policymakers’ views at a given moment, and those projections can change quickly if inflation, employment, or growth data shift, which is why markets reprice after every new release.

Catch the US Fed FOMC Meeting Updates here