Monetary policy surprises and interest rates: evidence from the Fed funds futures markets

Kenneth Kuttner

No 99, Staff Reports from Federal Reserve Bank of New York

Abstract: This paper estimates the impact of monetary policy actions on bill, note, and bond yields, using data from the futures market for federal funds to separate changes in the target funds rate into anticipated and unanticipated components. Bond rates' response to anticipated changes is essentially zero, while their response to unanticipated movements is large and highly significant. Surprise policy actions have little effect on near-term expectations of future actions, which helps explain the failure of the expectations hypothesis on the short end of the yield curve.

Keywords: Federal funds market (United States); Monetary policy; Interest rates (search for similar items in EconPapers)
Date: 2000
New Economics Papers: this item is included in nep-fmk and nep-mon
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Journal Article: Monetary policy surprises and interest rates: Evidence from the Fed funds futures market (2001)
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