Anchored to the Dot Plot: Central Bank Projections and Interest Rate Expectations

Eric Engstrom

No 2026-026, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

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.

Keywords: anchoring bias; monetary policy expectations; Federal Reserve communications; forecast efficiency; dot plot; term structure (search for similar items in EconPapers)
JEL-codes: E43 E47 E52 E58 G12 G14 (search for similar items in EconPapers)
Pages: 59 p.
Date: 2026-05-14
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.federalreserve.gov/econres/feds/files/2026026pap.pdf Full text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:103336

DOI: 10.17016/FEDS.2026.026

Access Statistics for this paper

More papers in Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.) Contact information at EDIRC.
Bibliographic data for series maintained by Ryan Wolfslayer ; Keisha Fournillier ().