What Fed funds futures tell us about monetary policy uncertainty

The uncertainty around future changes to the Federal Reserve target rate varies over time. In our results, the main driver of uncertainty is a "path" factor signaling information about future policy actions, which is filtered from federal funds futures data. The uncertainty is highest when it signals a loosening cycle. The uncertainty raises the risk premium in a loosening cycle, reducing the transmission of target changes to longer maturities. Our results trace the information content of federal funds futures to hedging demand.

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Year of publication:	2016
Authors:	Fontaine, Jean-Sébastien
Publisher:	Ottawa : Bank of Canada
Subject:	Asset pricing \| Financial markets \| Interest rates

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Series:	Bank of Canada Staff Working Paper ; 2016-61
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	10.34989/swp-2016-61 [DOI] 875730418 [GVK] hdl:10419/171952 [Handle] RePEc:bca:bocawp:16-61 [RePEc]
Classification:	E43 - Determination of Interest Rates; Term Structure Interest Rates ; E44 - Financial Markets and the Macroeconomy ; E47 - Forecasting and Simulation ; G12 - Asset Pricing ; G13 - Contingent Pricing; Futures Pricing
Source:	EconStor

Persistent link: https://www.econbiz.de/10011756444