Interest Rates in 2025: The Federal Reserve Dot Plot (Expected Value and Standard Deviation)

In this video we use the Federal Reserve dot plot to demonstrate how to use the Excel functions AVERAGE and SUMPRODUCT to calculate the expected value and standard deviation of the projected fed funds rate at the end of 2025. This problem is a supplement to problems in the Brigham, Financial Management text Chapter on Risk and Return Part 1.

The Fed’s dot plot is a chart that records each Fed official’s projection for the central bank’s key short-term interest rate. 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.