Advanced Search
MyIDEAS: Login

Effects of explicit FOMC policy rate guidance on market interest rates

Contents:

Author Info

  • Richhild Moessner
Registered author(s):

    Abstract

    We quantify the impact of explicit FOMC policy rate guidance used as an unconventional monetary policy tool at the zero lower bound of the policy rate on market interest rates. We study the impact on short- to medium-term interest rates implied by Eurodollar interest rate futures contracts, and on near- to long-term interest rates implied by US Treasury securities. We find that explicit policy rate guidance announcements significantly reduced interest rates implied by Eurodollar futures at horizons of 1 to 5 years ahead, with the largest effect at the intermediate horizon of 3 years. We also find that they significantly reduced forward interest rates implied by US Treasuries at horizons of 1 to 7 years ahead, with the largest effect at the intermediate horizons of 4 and 5 years. Moreover, we find that explicit FOMC policy rate guidance led to a significant reduction in the term spread, ie to a fiattening of the yield curve, both for the Eurodollar futures curve and the US Treasury yield curve.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.dnb.nl/en/binaries/Working%20Paper%20384_tcm47-294337.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by Netherlands Central Bank, Research Department in its series DNB Working Papers with number 384.

    as in new window
    Length:
    Date of creation: Jul 2013
    Date of revision:
    Handle: RePEc:dnb:dnbwpp:384

    Contact details of provider:
    Postal: Postbus 98, 1000 AB Amsterdam
    Web page: http://www.dnb.nl/en/
    More information through EDIRC

    Related research

    Keywords: Monetary policy; central bank communication; policy rate guidance;

    Find related papers by JEL classification:

    This paper has been announced in the following NEP Reports:

    References

    No references listed on IDEAS
    You can help add them by filling out this form.

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:dnb:dnbwpp:384. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Rob Vet).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.