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The reaction of interest rates to the employment report: the role of policy anticipations

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  • Timothy Q. Cook
  • Steve Korn

Abstract

Interest rates have reacted strongly to the monthly employment report in recent years. The authors document the reaction of rates to the report and provide evidence that it has been stronger since the mid-1980s than in earlier years. Evidently the report now has greater impact than formerly on expectations of where the Fed is going to move the federal funds rate. These expectations influence longer-term money market rates.

Suggested Citation

  • Timothy Q. Cook & Steve Korn, 1991. "The reaction of interest rates to the employment report: the role of policy anticipations," Economic Review, Federal Reserve Bank of Richmond, vol. 77(Sep), pages 3-12.
    • Handle: RePEc:fip:fedrer:y:1991:i:sep:p:3-12:n:v.77no.5
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    References listed on IDEAS

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    1. Neumark, David & Wascher, William L, 1991. "Can We Improve upon Preliminary Estimates of Payroll Employment Growth?," Journal of Business & Economic Statistics, American Statistical Association, vol. 9(2), pages 197-205, April.
    2. Goodfriend, Marvin, 1991. "Interest rates and the conduct of monetary policy," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 34(1), pages 7-30, January.
    3. Falk, Barry & Orazem, Peter F, 1985. "The Money Supply Announcements Puzzle: Comment," American Economic Review, American Economic Association, vol. 75(3), pages 562-564, June.
    4. Hardouvelis, Gikas A., 1988. "Economic news, exchange rates and interest rates," Journal of International Money and Finance, Elsevier, vol. 7(1), pages 23-35, March.
    5. Poole, William, 1988. "Monetary Policy Lessons of Recent Inflation and Disinflation," Journal of Economic Perspectives, American Economic Association, vol. 2(3), pages 73-100, Summer.
    6. Gerald P. Dwyer & Rik Hafer, 1989. "Interest rates and economic announcements," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 34-46.
    7. Cornell, Bradford, 1983. "The Money Supply Announcements Puzzle: Review and Interpretation," American Economic Review, American Economic Association, vol. 73(4), pages 644-657, September.
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    Cited by:

    1. Moura, Marcelo L. & Gaião, Rafael L., 2014. "Impact of macroeconomic surprises on the Brazilian yield curve and expected inflation," The North American Journal of Economics and Finance, Elsevier, vol. 27(C), pages 114-144.
    2. Daniel L. Thornton, 2018. "Greenspan's Conundrum and the Fed's Ability to Affect Long‐Term Yields," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 50(2-3), pages 513-543, March.
    3. Ramchander, Sanjay & Simpson, Marc W. & Chaudhry, Mukesh K., 2005. "The influence of macroeconomic news on term and quality spreads," The Quarterly Review of Economics and Finance, Elsevier, vol. 45(1), pages 84-102, February.
    4. Thornton, Daniel L., 2004. "The Fed and short-term rates: Is it open market operations, open mouth operations or interest rate smoothing?," Journal of Banking & Finance, Elsevier, vol. 28(3), pages 475-498, March.
    5. Gu, Chen & Chen, Denghui & Stan, Raluca & Shen, Aizhong, 2022. "It is not just What you say, but How you say it: Why tonality matters in central bank communication," Journal of Empirical Finance, Elsevier, vol. 68(C), pages 216-231.
    6. Adrienne A. Kearney, 2003. "The Changing Probability of a Monetary Policy Response to Inflation and Employment Announcements," Eastern Economic Journal, Eastern Economic Association, vol. 29(4), pages 565-574, Fall.
    7. Smales, Lee A. & Yang, Yi, 2015. "The importance of belief dispersion in the response of gold futures to macroeconomic announcements," International Review of Financial Analysis, Elsevier, vol. 41(C), pages 292-302.
    8. Michael J. Fleming & Eli M. Remolona, 1997. "What moves the bond market?," Economic Policy Review, Federal Reserve Bank of New York, vol. 3(Dec), pages 31-50.
    9. Aiyagari, S. Rao & Braun, R. Anton, 1998. "Some models to guide monetary policymakers," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 48(1), pages 1-42, June.
    10. Adrienne Kearney & Raymond Lombra, 2003. "Fed funds futures and the news," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 31(4), pages 330-337, December.
    11. Smales, L.A., 2017. "Commodity market volatility in the presence of U.S. and Chinese macroeconomic news," Journal of Commodity Markets, Elsevier, vol. 7(C), pages 15-27.
    12. Konstantinos Gkillas & Dimitrios Vortelinos & Christos Floros & Alexandros Garefalakis & Nikolaos Sariannidis, 2020. "Greek sovereign crisis and European exchange rates: effects of news releases and their providers," Annals of Operations Research, Springer, vol. 294(1), pages 515-536, November.
    13. Andritzky, Jochen R. & Bannister, Geoffrey J. & Tamirisa, Natalia T., 2007. "The impact of macroeconomic announcements on emerging market bonds," Emerging Markets Review, Elsevier, vol. 8(1), pages 20-37, March.
    14. Kurov, Alexander & Stan, Raluca, 2018. "Monetary policy uncertainty and the market reaction to macroeconomic news," Journal of Banking & Finance, Elsevier, vol. 86(C), pages 127-142.
    15. Mr. Jochen R. Andritzky & Mr. Geoffrey J Bannister & Ms. Natalia T. Tamirisa, 2005. "The Impact of Macroeconomic Announcements on Emerging Market Bonds," IMF Working Papers 2005/083, International Monetary Fund.
    16. Michael J. Fleming & Eli M. Remolona, 1996. "Price formation and liquidity in the U.S. treasuries market: evidence from intraday patterns around announcements," Research Paper 9633, Federal Reserve Bank of New York.
    17. Smales, L.A., 2021. "Macroeconomic news and treasury futures return volatility: Do treasury auctions matter?," Global Finance Journal, Elsevier, vol. 48(C).
    18. Sobti, Neharika & Sehgal, Sanjay & Ilango, Balakrishnan, 2021. "How do macroeconomic news surprises affect round-the-clock price discovery of gold?," International Review of Financial Analysis, Elsevier, vol. 78(C).

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