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Financial market effects of FOMC projections

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  • Couture, Cody

Abstract

I examine the impact of the forecasts released by the Federal Open Market Committee (FOMC) in the Summary of Economic Projections over the period of April 2011 through March 2019. I find that changes in the median FOMC federal funds rate forecast did impact asset prices, but forecasts of output and inflation did not have any effect, which may be surprising based on the literature regarding the “Fed information effect” channel. Further, the dispersion in the federal funds rate forecast does not affect asset prices though it does impact the degree of uncertainty regarding future monetary policy. Finally, I find that most of forward guidance can be summarized through the change in the median federal funds rate forecast for the end of the following year.

Suggested Citation

  • Couture, Cody, 2021. "Financial market effects of FOMC projections," Journal of Macroeconomics, Elsevier, vol. 67(C).
    • Handle: RePEc:eee:jmacro:v:67:y:2021:i:c:s0164070420302019
    DOI: 10.1016/j.jmacro.2020.103279
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    Cited by:

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    2. Ahmed, Walid M.A. & Sleem, Mohamed A.E., 2023. "Short- and long-run determinants of the price behavior of US clean energy stocks: A dynamic ARDL simulations approach," Energy Economics, Elsevier, vol. 124(C).

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    More about this item

    Keywords

    FOMC projections; Forward guidance; Asset prices; Dot plots;
    All these keywords.

    JEL classification:

    • 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
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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