A start-up that has been predicting the Fed’s next move just scored $3 million in funding

Essentially, Prattle quantifies the language in Fed communications. That data can then be used to predict the market impact of a certain central bank statement.

The company received a boost last year when the San Francisco Fed said Prattle was able to predict the Fed’s “dot plot,” the aggregated forecast of where Fed officials see interest rates at numerous points in the future, using Fed communications ahead of the dot plot’s release. And in December 2016, the Fed confirmed that the data produced by Prattle can be used to predict the impact of Fed communications on treasury yields.

The idea for Prattle can be traced back to Schnidman’s days as an academic.

“I am a self-described recovering academic,” he told Business Insider.

“I got my PhD in game theory, and in the process I became obsessed with the Federal Reserve and the ways in which they communicate,” Schnidman said.

“I quickly noticed that the markets had an incredibly difficult time digesting the complexity of Federal Reserve communications,” he said. “Pundits on every business news channel would spend hours analyzing one sentence or phrase.”

Schnidman figured there had to be a better way to analyze the totality of these communications in a more efficient and time effective manner. And thus Prattle was born.

Prattle’s data will likely become more attractive as the markets continue to grow in complexity, according to Trevor Kienzle, the managing director of Correlation Ventures, one of the firms participating in the funding round.

“Prattle’s technology is fundamentally changing the way traders and analysts think about and consume financial information,” he said. “Data matters more today than ever before, and being able to effectively quantify market-moving language has tremendous potential, not only for financial services, but in a variety of other industries.”