Fed chair Jerome Powell's news conferences aren't the only thing that's closely watched after the Federal Reserve makes its much-anticipated interest rate decisions.

For the past 12 years, the Fed has also released a so-called "dot plot" at the conclusion of each meeting, which offers an insight into how policymakers think rates may evolve in the future.

Each dot represents a member of the Federal Open Markets Committee and illustrates their predictions for where interest rates will be at year-end and in the long run.

These forecasts offer a glimpse into how the cost of borrowing could change over the next two or three years.

In fact, at the last meeting, it was not a remark but a dot plot that told us the Fed now anticipates just one rate cut in 2024 rather than two, taking the markets by surprise.

The graph also revealed that policymakers expect interest rates to settle at a higher level than previously thought—great news for savers and bad news for borrowers.

But while the Fed has touted the quarterly dot plot as a way of boosting transparency and communicating with the markets, it hasn't always proven accurate.

A vanity metric?

Back in December 2019, FOMC members couldn't have foreseen that a global pandemic would lead to the base rate being slashed close to zero.

A year later, the vast majority of policymakers said they expected the target range would remain at 0.25% right through until the end of 2023 at the earliest.

By contrast, rates ended up being hiked aggressively throughout 2022 as the Fed battled to bring inflation under control.

Jerome Powell has repeatedly nodded to the dot plot's limitations, and back in 2019, he gave a little art history lesson in an attempt to drive his point home.

He showed reporters a constellation of dots that had little meaning but, when zoomed out, formed part of a painting by the French artist Georges Seurat.

"If you are too focused on a few dots, you may miss the larger picture," the Fed chair said at the time.

Each dot on the graph is anonymous, meaning the identities of policymakers who are outliers to the rest of the committee aren't known. However, analysts often identify them by scrutinizing officials' public statements.

According to Powell, that's not the right way to study the dot plot. Instead, he proposed to look at the broader patterns in it.

For example, tightly packed dots suggest that there is consensus among the FOMC on how rates should change in the not-too-distant future, while divergence indicates disagreement.

Some experts argue that the dot plot should now be retired, and uncertain times mean it's no longer a reliable barometer of where the economy is heading.

Alison Schrager, an economist and senior fellow at the Manhattan Institute, told NPR, "Now we just keep seeing month after month them putting out these projections that turn out not to happen."

"That undermines the whole point of this exercise: credibility. I don't even know why people look at the dot plot anymore."

There's no indication that the dot plot's days are numbered.

But as Powell would tell you, this is a graph designed to give you an insight into the committee's thinking—but it's not a cast-iron guarantee on where rates will be in the future.