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FOMC Communications and the Predictability of Near-Term Policy Decisions

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In February 1994, the FOMC began a new era in transparency, gradually building a communications apparatus that conveys information about the Committee’s decisions and expectations. Has the new apparatus improved the public’s ability to predict FOMC interest rate decisions? New research based on the prices of fed funds futures shows that over the past decade, it has, especially over horizons of two to three months.

In February 1994, the FOMC began a new era in transparency, gradually building a communications apparatus that conveys information about the Committee’s decisions and expectations. Has the new apparatus improved the public’s ability to predict FOMC interest rate decisions? New research based on the prices of fed funds futures shows that over the past decade, it has, especially over horizons of two to three months.


Suggested citation: Carlson, John B., Ben Craig, Patrick Higgins, and William R. Melick, 2006. "FOMC Communications and the Predictability of Near-Term Policy Decisions," Federal Reserve Bank of Cleveland, Economic Commentary, 06.01.2006.

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