Dot Plot Dispersion Analysis

Overview

This pillar analyzes the dispersion of interest rate projections within the Federal Reserve's FOMC dot plot. It quantifies the level of agreement or disagreement among policymakers, providing a crucial signal about the conviction behind future monetary policy.

What It Does

It ingests the quarterly Summary of Economic Projections (SEP) and focuses on the dot plot, which shows each FOMC member's anonymous projection for the future federal funds rate. The pillar calculates the statistical spread, range, and skew of these projections. This transforms a qualitative chart into a quantifiable measure of policy consensus.

Why It Matters

A tight grouping of dots signals strong consensus and a predictable policy path, while a wide dispersion suggests internal debate and a higher probability of future policy surprising the market. This analysis offers an edge by revealing the stability and conviction behind the headline median projection.

How It Works

First, the pillar extracts the individual rate projections from the latest FOMC dot plot for specific time horizons. It then calculates the standard deviation and interquartile range to measure the overall spread. Finally, it compares the mean versus the median projection to identify any directional skew in sentiment among members.

Methodology

The core metric is the standard deviation of all individual member projections for the target year, measured in basis points. The analysis also calculates the full range (highest dot minus lowest dot) and the count of 'outlier' dots, defined as projections more than 50 basis points from the median. A higher standard deviation indicates greater dispersion and lower policy consensus.

Edge & Advantage

This pillar provides a quantitative measure of FOMC conviction, allowing traders to look beyond the widely reported median dot and price in the risk of policy shifts.

Key Indicators

• Projection Standard Deviation

  high

  Measures the statistical spread of all dots. A higher value means more disagreement.

• Median vs Mean Skew

  medium

  The difference between the median and average projection, indicating if outliers are pulling the consensus higher or lower.

• Outlier Count

  high

  The number of members whose projections are significantly distant from the central tendency.

Data Sources

• Federal Reserve Board - Summary of Economic Projections (SEP)

  The official quarterly report containing the dot plot and other economic forecasts from FOMC participants.

Example Questions This Pillar Answers

• → Will the Federal Funds Rate target range be above 5.5% at the end of the year?
• → How many 25 bps interest rate cuts will the FOMC execute in the next 12 months?
• → What will be the median FOMC dot plot projection for year-end 2025?

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