Policy, Trade and Housing Events

FOMC Minutes and the Dot Plot

Two documents that reprice the curve without a single rate changing.

advanced · 5 min read · 15 XP

Between meetings, two documents can move the dollar as much as a decision does: the minutes, which reveal how the argument actually went, and the dot plot, which is the committee putting numbers on where it thinks rates are going. Both are widely misread.

The minutes

The Federal Reserve publishes the minutes of each FOMC meeting three weeks after it, at 2:00pm New York time. Other major banks publish equivalents — the ECB's "accounts", the Bank of England's minutes with its decision, the RBA's minutes two weeks after.

The minutes matter because a statement is a negotiated document that hides disagreement. The minutes show the range of views: how many participants favoured a different path, what conditions they said would change their mind, and what they were worried about.

Read them for conditionality. The valuable sentences are the ones that say what would have to happen for the committee to act. "Several participants noted that further progress on inflation would be needed before…" is a testable statement — you can watch the incoming data against it.

Read the counts. The Fed uses a deliberate vocabulary of quantity: a few, several, some, many, most, almost all. These are not casual. A shift from "several participants" to "many participants" between two sets of minutes is a real change in the balance of the committee.

Three weeks is a long time

Minutes describe a meeting that happened three weeks earlier. If major data has landed since — a hot CPI, a weak payrolls print — the minutes may describe a debate the committee has already moved past. Markets sometimes react hard to minutes that are stale, and those reactions frequently reverse. Always ask what has happened since the meeting.

The dot plot

Four times a year — March, June, September and December — the FOMC publishes its Summary of Economic Projections, which includes the chart universally known as the dot plot.

Each participant marks where they think the appropriate policy rate will be at the end of this year, the next two years, and in the longer run. Each dot is one participant.

How to read it properly:

  • The median dot is what the market trades: the middle projection for each horizon.
  • The change in the median since the last SEP is the event. A median that moves from two cuts next year to one is a hawkish shift, and the whole curve reprices.
  • The dispersion matters as much as the median. Tightly clustered dots signal a confident committee; widely scattered dots signal genuine disagreement and a less reliable median.
  • The longer-run dot is the committee's estimate of the neutral rate. Changes there are rare and significant, because they redefine what "restrictive" means.

What the dot plot is not

It is not a commitment, not a forecast of what will happen, and not a vote. Each dot is one person's view of what would be appropriate if the economy evolves as they expect. Participants who do not vote that year still submit dots. The committee has repeatedly delivered a path quite different from what the dots showed, and its own chairs have cautioned against treating it as a plan.

Trade the change in the dots as information about the committee's current thinking. Do not trade the dots as a schedule.

USD/JPY at 18:00 GMT on an SEP day — the dot-plot median is the repricing event

How they move the currency

Both documents work through the same channel as everything else in this path: they change the expected rate path, which changes the rate differential, which moves the exchange rate. No transaction in the currency market is required for the price to move — repricing the path is enough.

Event Typical dollar effect
Minutes more hawkish than the statement implied Strengthens
Minutes revealing broader support for cuts Weakens
Median dot shifted up versus last SEP Strengthens, often sharply
Median dot shifted down Weakens
Longer-run (neutral) dot revised up Strengthens, and is structurally significant
The dot plot shows the same number of cuts next year as last quarter, but the dots are far more dispersed. What have you learned?

That the committee is less united than the unchanged median implies. A tight cluster around two cuts and a wide scatter averaging two cuts are very different pieces of information: the second means the median is fragile and could shift substantially on a couple of data points. Practically, it raises the expected volatility of the next few releases, because there is more disagreement for the data to resolve. The median told you nothing had changed; the dispersion told you the opposite.

Practical habits

  • Put the four SEP meetings on your calendar at the start of the year. They carry more event risk than the other four.
  • After each SEP, note the median for each horizon. The next SEP's move against that is the trade.
  • Read minutes for conditionality, not for tone. Tone is already in the statement; conditions are new.
  • Always check what data has landed between the meeting and the minutes.

What to remember

  • Minutes reveal the range of committee views and, most usefully, the conditions members said would change their minds.
  • The Fed's quantity vocabulary — a few, several, many, most — is deliberate and its shifts are signals.
  • The dot plot is published four times a year; the market trades the change in the median, not the level.
  • Dispersion of the dots is as informative as the median, because it tells you how fragile that median is.
  • Neither document is a commitment; both move the currency purely by repricing the expected path.

FOMC minutes reveal the range of committee views and the conditions members said would change their minds, three weeks after the meeting — so they can be stale. The dot plot, published four times a year, is traded on the change in its median rather than its level, and the dispersion of the dots tells you how fragile that median is. Neither is a commitment; both move currencies purely by repricing the expected rate path.

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