Dot plot, statement, presser and minutes

The Fed communicates through four documents on a repeating cycle. Each one matters in a different way, and each one has a specific set of things to look for. This lesson is a reading guide.

The statement

The statement is a few hundred words released at 2:00 p.m. on decision day. It is deliberately formulaic, which is the point: traders compare it word-for-word to the previous one, and any change is a signal.

Things that change and what they mean:

Several news outlets publish a redline comparison against the previous statement within a minute of release. That redline is the fastest honest read of the decision.

The dot plot

At the four quarterly meetings, each of the nineteen participants submits their projection for the appropriate policy rate at the end of this year, the next two or three years, and "the longer run." The chart of those projections is the dot plot.

What to read:

• The median for each year. This is what headlines report as "the Fed sees two cuts next year."
• The dispersion. A tight cluster is a committee that agrees; a wide spread is one where a few data points could swing the median.
• The longer-run dot. This is the committee's estimate of the neutral rate. When it rises, the whole curve tends to shift up because the market's anchor for where rates settle has moved.
• The change in the median from the previous SEP. One fewer cut in the median is a hawkish surprise if the market had assumed the dots would hold.

Caveats that matter: dots are not commitments, each participant's dot is conditional on their own forecast of the economy, and the median has historically been a poor predictor of the actual path more than a year out. Traders use dots as a read on the committee's current reaction function, not as a forecast of what will happen.

Key idea: The statement's redline shows what changed in the committee's language; the dot plot's median and dispersion show what the committee thinks its own reaction function produces. Neither is a promise.

The press conference

At 2:30 p.m. the chair reads prepared remarks for ten to fifteen minutes and then takes questions for roughly forty minutes. The prepared remarks are usually consistent with the statement. The Q&A is where the moves happen, because reporters ask about the things the statement avoided.

What to listen for:

• Any characterisation of a specific data series ("we saw the last two CPI prints as encouraging").
• Words like "patient," "data-dependent," "meeting by meeting," and "not on a preset course." These signal that the bank is trying not to guide.
• Conditional statements ("if the labour market were to weaken unexpectedly, we would respond"). These are reaction function disclosures.
• Corrections. When the chair walks back the statement's tone, the 2:00 move often reverses.

It is common for ES to move one way at 2:00 on the statement and the other way by 3:15 on the presser. Module 5 covers how to trade around this rather than being run over by it.

The minutes

Three weeks after the meeting, at 2:00 p.m. Eastern, the Fed publishes the minutes. By then the market has often moved on, so minutes are typically a smaller event. They matter when they reveal:

• How many participants wanted a different outcome ("several participants" versus "a couple of participants" is a real scale the Fed uses deliberately).
• Discussion of tools not mentioned in the statement, such as the pace of balance-sheet runoff.
• Staff forecasts, which have occasionally diverged from the committee's public tone.

The vocabulary of quantity, from "a couple" to "a few," "several," "many," "most," and "almost all," is roughly ordinal. Reporters count these words. So can you.

Putting them in order of market impact

For a typical meeting cycle, in descending order: the press conference Q&A, the statement redline, the dot-plot median change (quarterly meetings only), and the minutes. That order flips when the statement contains a genuine surprise such as an unexpected hold, an unexpected size, or a dissent from a senior member. Speeches between meetings can rank anywhere depending on who is speaking and whether they are introducing a new idea.

Try it: Take the last FOMC statement and the one before it. Read them side by side and list every changed phrase. For each, write "hawkish," "dovish," or "neutral." Then check what the two-year yield did between 2:00 and 2:05 that day. Did your reading match the market's?

Recap

• The statement is read as a redline against the previous one; changed phrases are the signal.
• The dot plot shows the median path, the dispersion, and the longer-run neutral estimate; treat it as a reaction-function readout, not a forecast.
• The press conference Q&A is where the largest moves usually occur, and often reverses the 2:00 move.
• Minutes use an ordinal vocabulary ("a couple," "several," "many," "most") to describe how many participants held a view.
• Impact order in a normal cycle: presser, statement, dots, minutes; surprises reorder it.