Inferring Market Interest Rate Expectations from Money Market Rates
Year: 2005
Type: preprint
Abstract: The Bank's Monetary Policy Committee is interested in market expectations of future interest rates. Short-term interest rate expectations can be inferred from a wide range of money market instruments. But the existence of term premia and differences in the credit quality, maturity, liquidity and contract specifications of alternative instruments means that we have to be careful when interpreting derived forward rates as indicators of the Bank's repo rate. This article discusses the differences between some of the available instruments and relates these to the interest rate expectations that are calculated from them. It also describes the Bank's current approach to inferring rate expectations from these instruments.
Source: SSRN Electronic Journal
Authors: Martin Brooke, Neil Cooper, Cedric Scholtes
Institution: Bank of England
Language: English
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2261003589