Data dependence awakens

Benjamin Pyle and John Williams

FRBSF Economic Letter, 2016

Abstract: Market participants typically update their views on future policy actions based on incoming economic data. However, when interest rates are near zero, monetary policy actions are viewed as less data dependent than in ?normal? times. From 2010 to 2014, market expectations of interest rates over the near term exhibited little data dependence. In the past year or so, market-based measures of data dependence have risen considerably, although they are still below earlier norms. This suggests that investors are increasingly viewing monetary policy actions as data dependent.

Date: 2016
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