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Front-End Term Premiums in Federal Funds Futures Rates and Implied Probabilities of Future Rate Hikes

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  • Don H. Kim
  • Hiroatsu Tanaka

Abstract

In this note, we examine empirical evidence on term premiums at the very front end, utilizing federal funds futures data as well as responses to the Desk's sell-side survey (Survey of Primary Dealers, or PD survey) and buy-side survey (Survey of Market Participants), and discuss plausible front-end term premium assumptions that one can use to extract probabilities of a rate hike at upcoming meetings from market quotes.

Suggested Citation

  • Don H. Kim & Hiroatsu Tanaka, 2016. "Front-End Term Premiums in Federal Funds Futures Rates and Implied Probabilities of Future Rate Hikes," FEDS Notes 2016-11-18, Board of Governors of the Federal Reserve System (U.S.).
  • Handle: RePEc:fip:fedgfn:2016-11-18
    DOI: 10.17016/2380-7172.1884
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    File URL: https://www.federalreserve.gov/econresdata/notes/feds-notes/2016/front-end-term-premiums-in-federal-funds-futures-rates-and-implied-probabilities-of-future-rate-hikes-20161118.html
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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Near-term expectations for the federal funds rate
      by thebusinesscycleblog in The business cycle blog on 2016-11-28 18:53:27

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