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Money and Financial Markets

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The trajectory of expected future policy actions has changed dramatically since the beginning of summer. Although no policy actions appear imminent, federal funds futures suggest that rate hikes might begin early next year. Eurodollar futures, however, indicate that substantial rate hikes are not expected until 2005, keeping market interest rates below estimates of the longer-term equilibrium rate for at least a year. Implied yields on eurodollars remain persistently below the implied yields observed in March, which suggests that the policy stimulus will persist longer than was thought possible last spring.

Suggested citation: "Money and Financial Markets," Federal Reserve Bank of Cleveland, Economic Trends, no. 03-08, pp. 05-07, 08.01.2003.

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