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The information content of discount rate announcements and their effect on market interest rates


  • Timothy Q. Cook
  • Thomas K. Hahn


This paper presents evidence that throughout the 1973-85 period the Federal Reserve systematically used certain types of discount rate announcements to signal changes in its policy instrument, the Federal funds rate. Market participants understood the signals contained in discount rate announcements and used them to revise their expectations of the future path of the funds rate. These revisions in funds rate expectations caused movements in Treasury bill rates. The paper also presents evidence that discount rate announcements signaling changes in the funds rate had a strong effect on bond rates in the period since October 1979.

Suggested Citation

  • Timothy Q. Cook & Thomas K. Hahn, 1986. "The information content of discount rate announcements and their effect on market interest rates," Working Paper 86-05, Federal Reserve Bank of Richmond.
  • Handle: RePEc:fip:fedrwp:86-05

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    References listed on IDEAS

    1. V. Vance Roley & Rick Troll, 1984. "The impact of discount rate changes on market interest rates," Economic Review, Federal Reserve Bank of Kansas City, issue Jan, pages 27-39.
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    Cited by:

    1. Timothy Q. Cook, 1988. "Determinants of the Federal funds rate: 1979 - 1982," Working Paper 88-07, Federal Reserve Bank of Richmond.

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    Monetary policy ; Interest rates;


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