Anchored to the Dot Plot: Central Bank Projections and Interest Rate Expectations
Abstract
In January 2012, the Federal Reserve began publishing the Summary of Economic Projections (SEP) "dot plot," revealing FOMC participants' projections for the federal funds rate. This paper documents a dual role for SEP projections in the formation of private interest-rate expectations. On one hand, SEP projections contain valuable information, achieving lower forecast errors than consensus surveys, VAR models, and several market-based measures at many horizons. Because the SEP is informative, some reliance on it by private forecasters is natural. On the other hand, because the SEP is updated only quarterly, SEP projections that are useful when released can become stale between updates. If private forecasts continue to place excessive weight on those earlier projections, they may respond too slowly to newly arriving information. Consistent with this prediction, survey forecast errors-and, to a weaker extent, market-based forecast errors-are systematically related to the gap between current expectations and lagged SEP projections, even after controlling for macroeconomic conditions, risk premia, and other predictors of forecast errors. The findings imply that official guidance can simultaneously improve average forecast accuracy while reducing the speed with which new information is incorporated into expectations.
Finance and Economics Discussion Series Federal Reserve Board, Washington, D.C. ISSN 1936-2854 (Print) ISSN 2767-3898 (Online) Anchored to the Dot Plot: Central Bank Projections and Interest Rate Expectations Eric Engstrom 2026-026 Please cite this paper as: Engstrom, Eric (2026). “Anchored to the Dot Plot: Central Bank Projections and Interest Rate Expectations,” Finance and Economics Discussion Series 2026-026. Washington: Board of Governors of the Federal Reserve System, https://doi.org/10.17016/FEDS.2026.026. NOTE: Staff working papers in the Finance and Economics Discussion Series (FEDS) are preliminary materials circulated to stimulate discussion and critical comment. The analysis and conclusions set forth are those of the authors and do not indicate concurrence by other members of the research staff or the Board of Governors. References in publications to the Finance and Economics Discussion Series (other than acknowledgement) should be cleared with the author(s) to protect the tentative character of these papers.
= [ ] ¤ +
= + + ¤ = +(1 ) ¤ (0 1] = = ( )+ + + + 1 = = +1 1 ¡
= + +1 + + 1 + ¡ = = 0
+1 1 ¡ = + +1 + + 1 + ¡ + = 0
= +1 +(1 ) +1 1 1 ¡ ¡ (1 ) = + +1 + +1 + + 1 1 + ¡ ¡ 1 1 = = (1 )
= + +1 + + 1 + ¡ = 0
2 2 = (1 ) = 1 (1 + ) 0 82
+1 1 ¡
2 2
2
= (1 ) = 1 (1+ )
= + + +1 1 ¡ 2
2
= 4 = 3 = [ ] 1 = ¡ + 1 ¡ 1 ¡ [ ]
2 [ ] 2
10% 100 log( 500 500 ) 1 ¡ = 10 000 ¢log( 500 ) ¢log(100 (1 )) 2 (1 ) = 5 (1 25) 4 (1 00)
100 = + ( +1)+ + 1 + ¡ = 0
2
1 02208 00091 00565 00069 00398 00068 00006 ¡ ¡ (435)[0000] (151)[0167] ( 037)[0713] (032)[0758] (168)[0137] (057)[0623] ( 001)[0987] ¡ ¡ 2 0085[0007] 2 03901 00105 00530 00368 00303 00312 00343 ¡ ¡ ¡ (264)[0042] (111)[0307] ( 015)[0878] ( 055)[0659] (050)[0672] (128)[0297] ( 039)[0755] 2 ¡ ¡ ¡ 0097[0056] 3 07033 00137 02620 01510 00281 00448 00913 ¡ ¡ ¡ (318)[0016] (116)[0266] (077)[0554] ( 158)[0272] ( 028)[0830] (116)[0402] ( 060)[0638] 2 ¡ ¡ ¡ 0167[0040] 4 09563 00218 04583 02735 01146 00790 01482 ¡ ¡ ¡ (333)[0012] (148)[0173] (133)[0293] ( 241)[0112] ( 083)[0545] (134)[0368] ( 070)[0589] ¡ ¡ ¡ 2 0208[0037]
+1 1 ¡ 2
2 2
+ + + +1 1 ¡ 2 2 2
1 01265 00057 03799 00739 00370 00116 00565 13992 ¡ ¡ ¡ (126)[0246] (127)[0237] (151)[0157] ( 232)[0041]( 119)[0272](104)[0360]( 100)[0330](156)[0203] 2 ¡ ¡ ¡ 0094[0003] 2 02629 00034 07195 02228 01372 00339 01652 16870 ¡ ¡ ¡ (162)[0166] (046)[0667] (215)[0066] ( 320)[0013]( 179)[0141](143)[0259]( 147)[0213](183)[0135] 2 ¡ ¡ ¡ 0155[0016] 3 03721 00025 10161 04083 02724 00747 02689 26267 ¡ ¡ ¡ (198)[0077] (029)[0803] (297)[0026] ( 440)[0006]( 253)[0057](186)[0164]( 158)[0239](259)[0044] 2 ¡ ¡ ¡ 0272[0001] 4 04232 00012 11095 05536 03949 01373 03825 36988 ¡ ¡ ¡ ¡ (184)[0125] ( 012)[0915] (315)[0025] ( 483)[0005]( 284)[0050](221)[0118]( 167)[0216](325)[0016] 2 ¡ ¡ ¡ ¡ 0326[0003] 2 2
+1 1 ¡ 2
+ +1 +1 1 1 + ¡ ¡ 2
6 1 qtr 2 qtr 3 qtr 4 qtr 5 4 nt e c re 3 P 2 1 0 2012 2014 2016 2018 2020 2022 2024 2026
12 actual 10 forecasts 8 tn e c 6 re P 4 2 0 1985 1990 1995 2000 2005 2010 2015 2020 2025
1 qtr ahead 2 qtr ahead 1.5 2 ex post error 1 ex ante revision 1 0.5 s. 0 .s 0 tp tp .tc P -0.5 .tc P-1 -1 -2 -1.5 -2 -3 1990 2000 2010 2020 1990 2000 2010 2020 3 qtr ahead 4 qtr ahead 3 4 2 2 1 s.0 .s tp .tc-1 tp .tc 0 P P -2 -2 -3 -4 -4 1990 2000 2010 2020 1990 2000 2010 2020
6 actual forecasts 5 4 nt e c3 re P 2 1 0 2012 2014 2016 2018 2020 2022 2024 2026 2028 7 actual 6 forecasts 5 4 nt e c3 re P 2 1 0 -1 2012 2014 2016 2018 2020 2022 2024 2026 2028 1.5 BlueChip anchor SEP anchor 1 const/controls total 0.5 s tn io P 0 e g a nt e-0.5 c re P -1 -1.5 -2 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028
12 actual 10 forecasts 8 tn e c 6 r e P 4 2 0 1985 1990 1995 2000 2005 2010 2015 2020 2025
6 actual 5 forecasts 4 nt e c3 re P 2 1 0 2012 2014 2016 2018 2020 2022 2024 2026 2028 6 actual forecasts 4 nt e c2 re P 0 -2 2012 2014 2016 2018 2020 2022 2024 2026 2028 1.5 BlueChip anchor SEP anchor 1 const/controls total 0.5 stnio 0 P e g a n e t -0.5 cre P -1 -1.5 -2 2014 2016 2018 2020 2022 2024 2026
Cite this document
Eric Engstrom (2026). Anchored to the Dot Plot: Central Bank Projections and Interest Rate Expectations (FEDS 2026-026). Board of Governors of the Federal Reserve System, Finance and Economics Discussion Series. https://whenthefedspeaks.com/doc/feds_2026-026
@techreport{wtfs_feds_2026_026,
author = {Eric Engstrom},
title = {Anchored to the Dot Plot: Central Bank Projections and Interest Rate Expectations},
type = {Finance and Economics Discussion Series},
number = {2026-026},
institution = {Board of Governors of the Federal Reserve System},
year = {2026},
url = {https://whenthefedspeaks.com/doc/feds_2026-026},
abstract = {In January 2012, the Federal Reserve began publishing the Summary of Economic Projections (SEP) "dot plot," revealing FOMC participants' projections for the federal funds rate. This paper documents a dual role for SEP projections in the formation of private interest-rate expectations. On one hand, SEP projections contain valuable information, achieving lower forecast errors than consensus surveys, VAR models, and several market-based measures at many horizons. Because the SEP is informative, some reliance on it by private forecasters is natural. On the other hand, because the SEP is updated only quarterly, SEP projections that are useful when released can become stale between updates. If private forecasts continue to place excessive weight on those earlier projections, they may respond too slowly to newly arriving information. Consistent with this prediction, survey forecast errors-and, to a weaker extent, market-based forecast errors-are systematically related to the gap between current expectations and lagged SEP projections, even after controlling for macroeconomic conditions, risk premia, and other predictors of forecast errors. The findings imply that official guidance can simultaneously improve average forecast accuracy while reducing the speed with which new information is incorporated into expectations.},
}