The Fed should stop releasing the “dot plot” to the public. It’s usefulness is over, at least for now.
Federal Reserve Chair Jerome H. Powell before speaking at a Senate Banking Committee hearing on Capitol Hill, Nov. 30, 2021. What a difference a month makes. As recently as late March, financial markets firmly expected the Federal Reserve to start cutting interest rates. There was, to be sure, some debate over the precise date, but consensus prevailed that the Fed would cut rates at some point during the summer.
However, Mr. Powell’s “data dependent” message keeps getting undermined by a particular factor that is — also strictly speaking — under his and his colleagues’ control: the Fed’s quarterly publication of something called the “dot plot.”, the dot plot is a chart depicting the 19 Fed leaders’ estimates of what economic growth, inflation, unemployment and — crucially — the Fed’s benchmark interest rate will be by year’s end. Each dot represents one of the 19 forecasts.
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