Dot Plot: Too Early For Wholesale Changes

While there is general consensus that the current median dots will persist for all years, including the longer-run dot at 2.5%, the risks are skewed to a higher end-2024 rate and higher longer- run dot.

• In December, 11 of 19 participants posted dots at or below 4.50-4.75% (75bp of cuts), so it would take just two to rise to 4.75-5.00% or higher to move the median up one notch. MNI's Markets Team is pencilling in one net participant moving their dot up beyond 4.50-4.75%, leaving a 10-9 split in favor of 3 cuts.
• However the distribution at the bottom is likely to change, with the low dot (3.75-4.00%) moving up at least one notch, and the number of 4-cutters (4.25-4.50%) reduced from 4 to 2. In other words, the distribution around 2 to 3 cuts should remain fairly solid compared with December (12 of 19 members, vs 11 prior), with the lower end of the distribution shifting higher.
• Our Instant Answers eye both the annual Dot medians as well as the number of participants looking for fewer than 3 cuts (> 4.625%, currently 8 participants) and fewer than 2 cuts (>4.875%, currently 3 participants) to see in the event of a shift up in the 2024 dot whether it is a "solid" hawkish shift (eg 11 or more participants seeing fewer than 3 cuts).
• As for the outer years, we would only anticipate higher dots if 2024 is shifted higher (though some sell-side analysts expect 2024 unchanged but 2025 and 2026 higher).
• And while the submissions for the longer-run dot have been edging higher, this meeting may prove too early for an increase - some analysts expect a rise from 2.5% to 2.6%. There are only 18 longer-run dot submissions (St Louis Fed traditionally doesn't participate), with 8 at 2.50% and 3 at 2.375%; if two of those were to move to 2.625% or higher, the median would rise.
• The MNI Markets Team’s expectations for the updated Dot Plot are below.

Note- one of the 2026 dots is exactly at 2.50%, not midpoint of a range. Source: Fed, MNI