Anticipations of Monetary Policy in Financial Markets
Year: 2001
Type: article
Abstract: In recent years, financial markets appear better able to anticipate FOMC policy changes. Beginning in the late 1980s and early 1990s, longer-term interest rates and futures rates have tended to incorporate movements in the federal funds rate several months in advance, in contrast to the largely contemporaneous response typically observed before that time. After identifying these emerging trends, the paper parses the enhanced predictability into a component that can be attributed to the autoregressive behavior of the funds rate and a non-autoregressive component. The paper considers institutional developments in FOMC policy making that may have contributed to each of these components, including gradualism in adjusting the federal funds rate target and transparency regarding the setting of the target and future policy intentions.
Authors: Joe Lange, Brian Sack, William C. Whitesell
Institutions: Federal Reserve, Federal Reserve Board of Governors
Language: English
Domain: Social Sciences
Open Access status: hybrid
OpenAlex ID: W4298150672