A dot plot or dot chart consists of data points plotted on a graph. The Federal Reserve uses dot plots to show its predicted interest rate outlook.

The dot plot is best explained with an example, so to illustrate how it works, here's a real-world example of a Federal Reserve dot plot and how to interpret it.

The dot plot was invented in late 2011, at a time when Fed officials were considering how to prepare markets for the shift they hoped to make away from the unprecedented array of monetary support ...

The dot plot was invented in late 2011, at a time when Fed officials were considering how to prepare markets for the shift they hoped to make away from the unprecedented array of monetary support ...

The dot plot is updated every three months and is meant to provide insight into the Fed's future rate decisions, with the caveat that Fed officials can’t always predict the future.

And within this SEP is the Fed's " dot plot," or outline of where Fed officials think interest rates will be at the end of the year and each of the next two.