Consensus Amplifies Dot Plot Surprises: Ex Ante Dispersion and Treasury Yield Responses to the SEP

Abstract

The market impact of the Federal Reserve's dot plot depends on the expectations formed before its release. Using 43 Summary of Economic Projections meetings from September 2015 through June 2026, this paper measures surprises in the projected federal funds rate path relative to the Federal Reserve Bank of New York's pre-meeting surveys and combines them with high-frequency Treasury yield changes. Unconditionally, a 25-basis-point upward path surprise is associated with yield increases of about 4.4, 3.7, and 1.6 basis points at the two-, five-, and ten-year maturities, none of which is estimated precisely. Conditioning on the pre-meeting expectation distribution changes this picture. The same path surprise produces a substantially larger yield adjustment when pre-meeting expectations are concentrated: the interaction between the path surprise and survey dispersion is negative at all three maturities, with estimates of -424, -487, and -360 basis points per percentage point squared after controlling for revisions to inflation, unemployment, and growth projections. Evaluated at the tenth percentile of dispersion, a 25-basis-point surprise moves the twoyear yield by 18.6 basis points; at the ninetieth percentile the response is indistinguishable from zero. The interaction is negative in all 43 leave-one-meeting-out estimates and improves held-out predictive accuracy at the five- and ten-year maturities. Market disagreement, not dispersion across FOMC participants' published rate projections, generates this attenuation; the dot-dispersion interaction is positive rather than negative and is at most marginal. The effect appears in the initial release window, continues through the press conference, and accumulates over the full SEP event. Cross-panel construction and a reliability-based assessment indicate that survey measurement error attenuates rather than manufactures the result. Pre-meeting consensus is therefore a central determinant of dot plot transmission: the projected path matters not only through how far it moves, but also through how firmly the market had converged before publication.

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