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Monetary policy and financial market expectations: what did they know and when did they know it?

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Author Info

  • Michael R. Pakko
  • David C. Wheelock

Abstract

Interest rates sometimes seem to respond to Federal Reserve policy actions in unexpected ways--for example, falling when the Fed " tightens" monetary policy or rising when the Fed "eases" policy. In this article, Michael R. Pakko and David C. Wheelock attempt to demystify such responses. They show how trading in the federal funds futures market reveals public expectations of Federal Reserve actions, and how our knowledge of these expectations can help us interpret the behavior of interest rates.

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Bibliographic Info

Article provided by Federal Reserve Bank of St. Louis in its journal Review.

Volume (Year): (1996)
Issue (Month): Jul ()
Pages: 19-32

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Handle: RePEc:fip:fedlrv:y:1996:i:jul:p:19-32:n:v.78no.5

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Related research

Keywords: Monetary policy ; Monetary policy - United States ; Financial markets ; Federal funds market (United States) ; Federal funds market (United States) ; Interest rates;

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Cited by:
  1. John C. Robertson & Daniel L. Thornton, 1997. "Using federal funds futures rates to predict Federal Reserve actions," Review, Federal Reserve Bank of St. Louis, issue Nov, pages 45-53.
  2. Söderström, Ulf, 1999. "Predicting monetary policy using federal funds futures prices," Working Paper Series in Economics and Finance 307, Stockholm School of Economics.

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