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A monetary policy rule based on nominal and inflation-indexed Treasury yields

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  • Brian P. Sack

Abstract

The yields on nominal and inflation-indexed Treasury debt securities can be used to derive a proxy for the inflation expectations of market participants. This paper investigates whether such a measure has provided a useful guide for monetary policy decisions by the Federal Reserve. The results indicate that since 1999, U.S. monetary policy decisions can be effectively characterized by a simple policy rule in which changes in the federal funds rate respond to the forward rate of inflation compensation.

Suggested Citation

  • Brian P. Sack, 2003. "A monetary policy rule based on nominal and inflation-indexed Treasury yields," Finance and Economics Discussion Series 2003-07, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgfe:2003-07
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    References listed on IDEAS

    as
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    Keywords

    Monetary policy; Government securities; Inflation-indexed bonds;
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