Want to know where interest rates are headed? During tumultuous economic times, it’s normal to search for answers about what’s to come for your finances.

While there’s no way to predict exactly what will happen, the Federal Reserve has tools that some people look to for insights. Among them is the Fed’s dot plot, which shows where the Fed’s policymakers see interest rates headed in the next few years.

This chart, which is published quarterly, certainly can’t guarantee what’s to come. In fact, some say it’s not worth paying attention to at all. But others look to the dot plot for insights into what the Fed will do in the short term.

The dot plot is a chart that shows how the Fed’s top policymakers — members of the Federal Open Market Committee (FOMC) — think the Fed will change short-term interest rates over the next few years.

There are up to 19 dots on the Fed’s dot plot, each one representing the prediction of one anonymous member of the Federal Reserve Board. Those predictions are updated at each FOMC meeting based on a review of what’s happening with the economy and the outcomes each member believes are most likely in the future.

The Federal Reserve began publishing the chart in 2012 as part of an effort to increase transparency around its policies. The dot plot can now be found in the Summary of Economic Projections published each March, June, September, and December.

The Fed’s dot plot might look like a mess at first glance, but it’s easy to read with a little guidance.

The Y axis (vertical) shows the target percent for the federal funds rate. On the X axis (horizontal), you’ll see the rate predictions for the end of the current year, along with the end of the two upcoming years, and for the “longer run.” The longer-run projections show what each member believes will happen if there are no further shocks to the economy.

The dot plot only tells us what the FOMC members estimate will happen to interest rates in the future. But remember, they are educated guesses and they’re not necessarily accurate, since a variety of factors could change the ultimate outcome.

With that in mind, here’s how you might benefit from reading the Fed’s dot plots:

  • Identify trends that indicate where interest rates are headed.

  • Get a sense of whether the Fed’s members anticipate rate cuts or increases.

  • Determine how much agreement there is between committee members over future policies.

  • See if rates are expected to rise or fall, and prepare to shift your investment strategy as needed.

Before using the Fed’s dot plot to help with your financial strategies, it’s important to acknowledge its limitations.

Historically, the chart is only minimally accurate at estimating rates with a one-year horizon and not at all accurate at predicting rates two or more years in advance. According to Fed Chair Jerome Powell, “The dots are not a great forecaster of future rate moves,” and there is actually “no great forecaster.”

Why are tools like the dot plot so inaccurate? Mainly because the Fed only influences the economy, but doesn’t control it. The Federal Reserve adjusts interest rates based on economic conditions that are beyond its control and are sometimes completely unpredictable, such as inflation and unemployment.

In other words, any number of unforeseen events or policy changes could change the Fed’s short-term monetary policy. For example, tariffs or conflicts abroad could have a swift and significant impact on inflation.

On top of that, the dot plot showcases the disagreements between FOMC members about where the economy is headed and what corrective measures are necessary. And as you look further out on the chart, you’ll notice their forecasts differ even more.

So you’re interested in getting a sense of what will happen with interest rates, don’t put too much stock in the Fed’s dot plot, especially when it comes to predictions over a year out. Instead, you could be better off taking multiple data points and reports into consideration, including FOMC Meeting Statement, the yield curve, and the full quarterly Summary of Economic Projections.