The dot plot, once hailed as the pinnacle of central bank transparency, is facing a genuine institutional overhaul. With Fed Chair Warsh declining to submit his personal projections for the second consecutive time, the operational viability of the Summary of Economic Projections (SEP) is now under direct scrutiny.
The latest SEP, released last week, was compiled by 18 FOMC members, excluding Warsh himself. The median projections indicate that compared to June, committee members now anticipate stronger U.S. economic growth, a labor market hovering near full employment, and a higher inflation peak that recedes more slowly, only returning to the 2% target by 2029. Aligned with this economic trajectory, the median interest rate path has also been revised upward for the next three years relative to the June forecast.
Warsh’s own macro assessment at last week’s press conference did not contradict the hawkish tilt of the dot plot. He stated that the U.S. economy has strengthened since the June meeting, with higher underlying growth and a labor market essentially at full employment, while inflation improvement has been limited, adding that "inflation is the problem."
The real divergence centers on how policy judgments are communicated to the market. Warsh publicly stated in June that the SEP is "not useful for policy setting" and anticipates introducing a new communication framework before the end of 2026, responding to his long-standing criticism of the projection system. In April, he also noted that policymakers tend to cling to existing projections for too long, and he personally prefers not to pre-announce future policy decisions to the market.
The Dot Plot's Issues Extend Beyond Forecast Errors
The SEP currently publishes projections for economic growth, unemployment, inflation, and the "appropriate policy rate," but these are submitted anonymously by individual committee members without accompanying comprehensive economic logic. While outsiders can see different rate dots, it is difficult to determine whether a particular member is concerned about demand overheating, supply shocks, or believes the neutral rate itself has shifted. This leaves a void in the dot plot precisely when it is most needed to explain the policy reaction function.
The same higher rate projection can correspond to completely different economic scenarios; likewise, the same inflation forecast does not tell the market under what conditions a member would alter their policy path. The anonymous design was originally intended to avoid overemphasizing individual views, but it weakens the correspondence between projections and policy rationale.
The risk and uncertainty assessments attached to the SEP have also come under fire. According to a review by the Financial Times, FOMC members have consistently leaned toward judging growth risks as tilted to the downside and unemployment risks as tilted to the upside, while persistently viewing inflation risks as skewed higher since 2021. Over the past many years, members have almost never assessed economic uncertainty as below the average of the previous two decades, rendering this set of risk indicators largely ineffective in providing meaningful differentiation.
A study by the Chicago Fed this month also showed that the market does not mechanically follow the dot plot. If the median rate projection unexpectedly rises by 25 basis points, market expectations for future rates increase by only about 5 basis points on average. After last week's notably hawkish dot plot, the actual tightening in financial markets was also limited, indicating that investors have become "immune" to these projection points.
Critics Are Not Limited to Warsh
Voices opposing the current SEP design within the Fed are not scarce. Chicago Fed President Goolsbee described the SEP in 2024 as "a collection of opinions without economic content," with the core issue being the lack of explicable economic relationships between different projections. Even former Fed Chair Bernanke, who originally championed the dot plot system, argued in 2025 that the current framework overemphasizes central forecasts and inadequately provides conditional policy guidance linked to economic states.
Former Fed Vice Chair Donald Kohn has criticized the dot plot for creating "false precision," particularly when minor changes in the median prompt markets to assign excessive significance. On the other hand, the SEP is not entirely without value. Recent Fed research indicates that its economic projections have better predictive power for the future than private-sector consensus forecasts during the same period, so private forecasting institutions have reason to reference the SEP.
The issue centers on how to convert this "predictive ability" into clearer policy communication, rather than simply retaining a set of anonymous rate dots. Warsh’s recent explanations of long-term rates also show a preference for directly discussing the economic forces behind policy. Last Wednesday, he attributed the rise in yields mainly to a strong economy, competition for funds driven by a surge in capital expenditures, and global geopolitical factors, noting that heavy financing by large tech companies is increasing demand in capital markets. He also clearly stated that market pricing will not make decisions for the Fed.
Regarding investors who had already heavily positioned for rate hikes, Warsh said he observes market prices, but the decision to hike that day "is our decision." This stance aligns with his opposition to using the dot plot to pre-signal future policy paths. No new framework proposal has been made public yet, with Warsh previously offering a timeline of before the end of 2026. The Financial Times suggests that if the SEP and dot plot are replaced, the new institutional arrangement would at least need to continue meeting transparency and accountability requirements while more clearly illustrating how different economic scenarios correspond to different policy choices.