Abstract

In recent years, financial markets appear better able to anticipate Federal Open Market Committee (FOMC) policy changes. Beginning in the late 1980s and early 1990s, longer-term interest rates and futures rates have tended to incorporate movements in the federal funds rate several months in advance, in contrast to the largely contemporaneous response typically observed before that time. After identifying these emerging trends, the paper parses the enhanced predictability into a component that can be attributed to the autoregressive behavior of the funds rate and a nonautoregressive component. The paper considers institutional developments in FOMC policy making that may have contributed to each of these components, including gradualism in adjusting the federal funds rate target and transparency regarding the setting of the target and future policy intentions.

pdf

Additional Information

ISSN
1538-4616
Print ISSN
0022-2879
Pages
pp. 889-909
Launched on MUSE
2003-11-25
Open Access
No
Archive Status
Archived 2007
Back To Top

This website uses cookies to ensure you get the best experience on our website. Without cookies your experience may not be seamless.