Evergreen explainer. The dot plot (SEP) began June 2012. Linked from fomc QUESTIONS “the dots.” Inaugural page of the reference/ library.
The short answer: no
The dots are a poor predictor of the Fed’s own future actions, and the direction of the error depends on the regime. They are each participant’s projection conditional on their forecast — recent data extrapolated forward — so they lag turning points and get overruled by the next data. The dots follow the data; the data does not follow the dots.
The record bears this out quantitatively. Comparing each December dot-plot median for the next year-end against the rate the Fed actually delivered (2014–2024):
- In the 2015–2019 normalization, the Fed ran its projections ~0.5 percentage points too hawkish per year on average — it kept penciling more hikes than it delivered.
- The cleanest case is the one that matches today: December 2018 penciled two more 2019 hikes (a hawkish dot into a slowing economy). The Fed cut three times in 2019 — a 1.25-point miss that reversed direction entirely. Its own January 2019 minutes conceded the projections “do not accurately convey the Committee’s policy outlook.”
- The big misses go both ways, and both are exogenous shocks: COVID (Dec-2019 dots over-projected 2020 by 1.5pp) and the inflation surge (Dec-2021 dots under-projected 2022 by 3.5pp — the largest forecast error since the 1970s, where dovish dots met accelerating data and the Fed over-delivered).
The record: penciled vs. delivered
December SEP median for the next year-end (midpoint of the target range) vs. the realized year-end rate. Gap = penciled − delivered; + means the Fed promised a higher rate than it delivered (over-promised hikes).
| December SEP | Penciled (next yr-end) | Delivered | Gap | What happened |
|---|---|---|---|---|
| Dec 2014 | 1.13% (for ‘15) | 0.38% | +0.75 | penciled ~4 hikes for 2015; the liftoff slipped to December |
| Dec 2015 | 1.38% (for ‘16) | 0.63% | +0.75 | penciled ~4 hikes; delivered one |
| Dec 2016 | 1.38% (for ‘17) | 1.38% | 0.00 | on target (three hikes) |
| Dec 2017 | 2.13% (for ‘18) | 2.38% | −0.25 | did slightly more (four hikes) |
| Dec 2018 | 2.88% (for ‘19) | 1.63% | +1.25 | penciled two hikes; cut three times |
| Dec 2019 | 1.63% (for ‘20) | 0.13% | +1.50 | COVID → emergency cut to zero (exogenous) |
| Dec 2020 | 0.13% (for ‘21) | 0.13% | 0.00 | zero-bound hold |
| Dec 2021 | 0.88% (for ‘22) | 4.38% | −3.50 | inflation shock; hiked far more, far faster |
| Dec 2022 | 5.13% (for ‘23) | 5.38% | −0.25 | ~on target |
| Dec 2023 | 4.63% (for ‘24) | 4.38% | +0.25 | cut slightly more than penciled |
| Dec 2024 | 3.88% (for ‘25) | 3.63% | +0.25 | cut slightly more than penciled |
Sourced to the Fed’s own projection materials (median funds-rate row of each December SEP table) and FRED DFEDTARU for the delivered rate. Flat files + puller: research/dot-plot-followthrough/.
Why: the dots are an extrapolation, not a commitment
Each dot is conditional on a forecast, and FOMC forecasts are slow to incorporate new information (SF Fed, 2024), so the dots lag the turn. The follow-through question collapses to one thing: does the data that drove the surprise persist? When it does (2022 inflation), the Fed delivers and then some. When it doesn’t (2019), the projected hikes never come.
Application: the June 2026 hawkish surprise
The June 2026 dots flipped to a hike — hawkish — but landed as the inflation’s main driver (oil) collapsed and the Fed cut its own growth forecast. That is the December 2018 configuration (hawkish dots into softening data), not the 2022 one (hawkish dots into still-accelerating data). The base rate for that setup is under-delivery, with reversal risk if the data keeps softening. The bond market is already pricing it — the 10-year held through the hawkish dots. The series that decides which way it breaks is core PCE: confirm the dots and 2026 rhymes with 2022; undercut them, as oil’s collapse argues, and it rhymes with 2019.
Caveat
- The dot is a median; the distribution matters — a bimodal hawkish surprise is weaker guidance than a consensus one. The 2014 median predates the Fed printing an explicit median row (reconstructed from the dot distribution and the SEP narrative); all others read directly from the published median.
Sources
- Federal Reserve SEP projection materials, December 2014–2024 (
fomcprojtabl*.pdf) — the median funds-rate projection at each meeting. - FRED
DFEDTARU— delivered year-end federal funds target range (upper limit). - Federal Reserve, “Anchored to the Dot Plot” (FEDS); SF Fed, “Examining the Performance of FOMC Inflation Forecasts” (2024); Mickey Levy, “The Fed: Bad Forecasts and Misguided Monetary Policy” (Hoover, 2023); FOMC minutes, January 2019.