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Have minutes helped to predict fed funds rate changes?

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  • Jung, Alexander

Abstract

This paper examines whether the release of minutes of the Federal Open Market Committee (FOMC) has provided markets with systematic clues about its future policy rates. We explain the future fed funds rate changes using Ordered Probit models (sample 1996–2008). We find that timely FOMC meeting minutes have provided assurance to markets about the most likely path of future interest rates. Though, their release did not cause markets to fundamentally revise their expectations on future policy decisions. In line with Riboni and Ruge-Murcia (2014), the paper also finds that the internal skew derived from the Reserve Bank Presidents’ interest rate preferences of the FOMC contained systematic information about fed funds rate changes at forthcoming meetings.

Suggested Citation

  • Jung, Alexander, 2016. "Have minutes helped to predict fed funds rate changes?," Journal of Macroeconomics, Elsevier, vol. 49(C), pages 18-32.
    • Handle: RePEc:eee:jmacro:v:49:y:2016:i:c:p:18-32
    DOI: 10.1016/j.jmacro.2016.04.008
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    2. Baranowski, Pawel & Bennani, Hamza & Doryń, Wirginia, 2021. "Do the ECB's introductory statements help predict monetary policy? Evidence from a tone analysis," European Journal of Political Economy, Elsevier, vol. 66(C).
    3. Mikael Apel & Marianna Blix Grimaldi & Isaiah Hull, 2022. "How Much Information Do Monetary Policy Committees Disclose? Evidence from the FOMC's Minutes and Transcripts," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 54(5), pages 1459-1490, August.
    4. Cour-Thimann, Philippine & Jung, Alexander, 2020. "Interest rate setting and communication at the ECB," Working Paper Series 2443, European Central Bank.
    5. Bennani, Hamza & Fanta, Nicolas & Gertler, Pavel & Horvath, Roman, 2020. "Does central bank communication signal future monetary policy in a (post)-crisis era? The case of the ECB," Journal of International Money and Finance, Elsevier, vol. 104(C).
    6. Rayane Hanifi & Klodiana Istrefi & Adrian Penalver, 2022. "Central Bank Communication of Uncertainty," Working papers 898, Banque de France.
    7. Hannah Baker & Shauna Concannon & Matthias Meller & Katie Cohen & Alice Millington & Samuel Ward & Emily So, 2022. "COVID-19 and science advice on the ‘Grand Stage’: the metadata and linguistic choices in a scientific advisory groups’ meeting minutes," Palgrave Communications, Palgrave Macmillan, vol. 9(1), pages 1-16, December.
    8. Jung, Alexander, 2016. "Have monetary data releases helped markets to predict the interest rate decisions of the European Central Bank?," Working Paper Series 1926, European Central Bank.
    9. Cour-Thimann, Philippine & Jung, Alexander, 2021. "Interest-rate setting and communication at the ECB in its first twenty years," European Journal of Political Economy, Elsevier, vol. 70(C).
    10. Paweł Baranowski & Hamza Bennani & Wirginia Doryń, 2020. "Do ECB introductory statements help to predict monetary policy: evidence from tone analysis," NBP Working Papers 323, Narodowy Bank Polski.
    11. Hüpper, Florian & Kempa, Bernd, 2023. "Inflation targeting and inflation communication of the Federal Reserve: Words and deeds," Journal of Macroeconomics, Elsevier, vol. 75(C).

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    More about this item

    Keywords

    Monetary policy; Communication; FOMC minutes; Predictability; Ordered Probit;
    All these keywords.

    JEL classification:

    • C34 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Truncated and Censored Models; Switching Regression Models
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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