Monetary Policy Surprises and Interest Rates: Evidence from the Fed Funds Futures Market

FRB of New York Staff Report No. 99

24 Pages Posted: 28 Mar 2000

See all articles by Kenneth N. Kuttner

Kenneth N. Kuttner

National Bureau of Economic Research (NBER); Williams College

Date Written: March 2000

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: monetary policy, term structure, Fed funds futures

JEL Classification: E4, G1

Suggested Citation

Kuttner, Kenneth N. and Kuttner, Kenneth N., Monetary Policy Surprises and Interest Rates: Evidence from the Fed Funds Futures Market (March 2000). FRB of New York Staff Report No. 99, Available at SSRN: https://ssrn.com/abstract=218892 or http://dx.doi.org/10.2139/ssrn.218892

Kenneth N. Kuttner (Contact Author)

Williams College ( email )

326 Schapiro Hall
24 Hopkins Hall Drive
Williamstown, MA 01267
United States
413-597-2300 (Phone)

HOME PAGE: http://econ.williams.edu/people/knk1

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
568
Abstract Views
11,635
Rank
91,781
PlumX Metrics