How Do Survey- and Market-Based Expectations of the Policy Rate Differ?

Bonni Brodsky, Marco Del Negro, Joseph Fiorica, Eric LeSueur, Ari Morse and Anthony Rodrigues ()

No 20160407, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: Over the past year, market pricing on interest rate derivatives linked to the federal funds rate has suggested a significantly lower expected path of the policy rate than responses to the New York Fed’s Survey of Primary Dealers (SPD) and Survey of Market Participants (SMP). However, this gap narrowed considerably from December 2015 to January 2016, before widening slightly at longer horizons in March. This post argues that the narrowing between December and January was mostly the result of survey respondents placing greater weight on lower rate outcomes, while the subsequent widening between January and March likely reflects an increased demand for insurance against states of the world where the policy rate remains at very low levels.

Keywords: policy rate; survey expectations (search for similar items in EconPapers)
JEL-codes: E5 G1 (search for similar items in EconPapers)
Date: 2016-04-07
New Economics Papers: this item is included in nep-mac
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://libertystreeteconomics.newyorkfed.org/2016 ... icy-rate-differ.html Full text (text/html)

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:fednls:87115

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Liberty Street Economics from Federal Reserve Bank of New York Contact information at EDIRC.
Bibliographic data for series maintained by Gabriella Bucciarelli ().