EconPapers    
Economics at your fingertips  
 

Monetary policy and commodity futures

Michelle T. Armesto and William Gavin ()

Review, 2005, vol. 87, issue May, 395-405

Abstract: This paper constructs daily measures of the real interest rate and expected inflation using commodity futures prices and the term structure of Treasury yields. We find that commodity futures markets respond to surprise increases in the federal funds rate target by raising the inflation rate expected over the next 3 to 9 months. There is no evidence that the real interest rate responds to surprises in the federal funds target. The data from the commodity futures markets are highly volatile; we show that one can substantially reduce the noise using limited information estimators such as the median change. Nevertheless, the basket of commodities actually traded daily is quite narrow and we do not know whether our observable rates are closely connected to the unobservable inflation and real rates that affect economywide consumption and investment decisions.

Keywords: Commercial products; Monetary policy (search for similar items in EconPapers)
Date: 2005
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://files.stlouisfed.org/files/htdocs/publicat ... /05/ArmestoGavin.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedlrv:y:2005:i:may:p:395-405:n:v.87no.3

Access Statistics for this article

Review is currently edited by Juan M. Sanchez

More articles in Review from Federal Reserve Bank of St. Louis Contact information at EDIRC.
Bibliographic data for series maintained by Scott St. Louis ().

 
Page updated 2025-07-17
Handle: RePEc:fip:fedlrv:y:2005:i:may:p:395-405:n:v.87no.3