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Monetary policy rate expectation and energy prices during the FOMC announcement period

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  • Jang, Hyeonung
  • Seo, Byoung Ki

Abstract

This study investigates the relationship between energy prices and anticipated changes in monetary policy during the announcement periods of the Federal Open Market Committee (FOMC). According to the findings, the energy market experienced abnormal price movements before the scheduled FOMC announcements, and these movements are related to the FOMC’s monetary policy decision made the following day. Moreover, changes in the expected monetary policy rate, and not the unexpected rate, affect prices. The volatility of the energy prices increases the day before the scheduled FOMC announcements only if the expected policy rate change is negative.

Suggested Citation

  • Jang, Hyeonung & Seo, Byoung Ki, 2020. "Monetary policy rate expectation and energy prices during the FOMC announcement period," Finance Research Letters, Elsevier, vol. 32(C).
    • Handle: RePEc:eee:finlet:v:32:y:2020:i:c:s1544612318305725
    DOI: 10.1016/j.frl.2019.01.005
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    More about this item

    Keywords

    Energy price; Monetary policy; Policy rate expectation; Federal funds rate;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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