🦧 what the dot
📊 what the dots mean
last week, the fed raised target rates by another 75 basis points (or .75%)
the dot plot above was released last wednesday after the latest fomc (federal open market committee) meeting
each dot represents each fed official's projection for the fed funds rate
what is the fed funds rate?
there are many types of interest rates (i.e. mortgage, credit card, etc.)
the fed funds rate is the key short-term interest rate that gets targeted after each fomc
it's the rate at which banks and other depository institutions lend money to each other, usually on an overnight basis (yes, that is a whole business)
now, none of us borrows money at the fed funds rate (and in fact at rates higher, since we’re nowhere close to being as “riskless” as a bank), but in essence, the fed funds rate is the benchmark
if that number goes up, all other interest rates generally go up, and vice versa (to put it very simple)
so what’s up with the latest dot plot?
basically, there's still more room for rate hikes
fed official anticipate rates to rise to as high as 4.6% in 2023
6 out of 19 dots are even indicating the 4.75-5.00% range
also, officials indicated inflation may not come down to the traditional 2% target until 2025