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2026-09-16 13:26:08
[Fed Rate Hikes in Focus: Dot Plot Attracts Attention, But Warsh's Stance Raises Questions on Credibility] (1) If the Fed raises rates this week, investors will focus on the "dot plot" to determine how many more rate hikes there will be. The dot plot, published regularly since 2012, shows anonymous forecasts from 19 Fed officials and is intended to convey policy intentions in advance. (2) Wall Street generally expects a rate hike on Wednesday, but is more concerned about the end of the rate cycle. The June dot plot showed only one rate hike this year, and a barely acceptable one, and hinted at a possible small rate cut in 2027. The current disagreement is whether this is an isolated rate hike or the beginning of a rate hike cycle; some expect another hike before the end of the year and one or two more in 2027, some see it as a one-off, and others expect a compromise. (3) The key question is the credibility of the dot plot. Fed Chairman Warsh has long criticized the dot plot and refused to submit his own interest rate forecast in June, saying it did not help with policy implementation and hinting that he might downplay the plot. (4) Even if Warsh does not submit his forecast, the other 18 officials are expected to submit theirs, and the dot plot may still affect stock and bond prices. But Warsh's attitude has raised questions: How much trust should investors place in the dot plot in the future? (5) The dot plot has never been very accurate, and previous chairs, including Powell, have warned against relying on it entirely. Critics say it will soon become obsolete and sometimes mislead policy. Raymond James' Alleman said not to take it too seriously; EY Parthenon's Dako predicted that Warsh would dampen expectations of another rate hike in 2026. (6) The 2027 forecast is even more ambiguous: institutions believe that slower inflation next year may create room for rate cuts, but most investors expect at least one more rate hike. Chris Lowe of FHN Financial said the new dot plot may suggest an increased probability of at least one rate hike next year.
