[{"data":1,"prerenderedAt":-1},["ShallowReactive",2],{"detail-sidebar-cat-0-en-105":3,"doc-seo-326083-105":59,"doc-detail-326083-en":130},{"code":4,"msg":5,"data":6},0,"success",[7,13,18,23,28,33,38,43,48,51,55],{"id":8,"doc_module":4,"doc_module_name":9,"category_name":10,"show_sort_weight":11,"slug":12},1,"Document","Story & Novel",90,"story-novel",{"id":14,"doc_module":4,"doc_module_name":9,"category_name":15,"show_sort_weight":16,"slug":17},2,"Literature",80,"literature",{"id":19,"doc_module":4,"doc_module_name":9,"category_name":20,"show_sort_weight":21,"slug":22},4,"Exam",70,"exam",{"id":24,"doc_module":4,"doc_module_name":9,"category_name":25,"show_sort_weight":26,"slug":27},5,"Comic",60,"comic",{"id":29,"doc_module":4,"doc_module_name":9,"category_name":30,"show_sort_weight":31,"slug":32},6,"Technology",50,"technology",{"id":34,"doc_module":4,"doc_module_name":9,"category_name":35,"show_sort_weight":36,"slug":37},7,"Healthcare",40,"healthcare",{"id":39,"doc_module":4,"doc_module_name":9,"category_name":40,"show_sort_weight":41,"slug":42},8,"Research & Report",30,"research-report",{"id":44,"doc_module":4,"doc_module_name":9,"category_name":45,"show_sort_weight":46,"slug":47},9,"Religion & Spirituality",20,"religion-spirituality",{"id":46,"doc_module":4,"doc_module_name":9,"category_name":49,"show_sort_weight":46,"slug":50},"World Cup","world-cup",{"id":52,"doc_module":4,"doc_module_name":9,"category_name":53,"show_sort_weight":52,"slug":54},10,"Lifestyle","lifestyle",{"id":56,"doc_module":4,"doc_module_name":9,"category_name":57,"show_sort_weight":24,"slug":58},19,"General","general",{"code":4,"msg":60,"data":61},"ok",{"site_id":62,"language":63,"slug":64,"title":65,"keywords":66,"description":67,"schema_data":68,"social_meta":123,"head_meta":125,"extra_data":127,"updated_unix":129},105,"en","monetary-policy-and-the-federal-funds-futures-market","Monetary Policy and the Federal Funds Futures Market","","The text explains how monetary policy actions by the Federal Open Market Committee (FOMC) were translated into movements in the federal funds rate, using the 1994 run-up as a key example. It describes how fed funds futures reflect the market’s expectation of the FOMC’s intended policy rate by embedding predictions of monthly averages into contract settlement prices. It also outlines how traders interpret futures pricing, and how the futures market’s outlook evolved sharply in 1995.",{"@graph":69,"@context":122},[70,84,105],{"@type":71,"itemListElement":72},"BreadcrumbList",[73,77,79,82],{"item":74,"name":75,"@type":76,"position":8},"https://docshare.wps.com","Home","ListItem",{"item":78,"name":9,"@type":76,"position":14},"https://docshare.wps.com/document/",{"item":80,"name":40,"@type":76,"position":81},"https://docshare.wps.com/document/research-report/",3,{"item":83,"name":65,"@type":76,"position":19},"https://docshare.wps.com/document/monetary-policy-and-the-federal-funds-futures-market/326083/",{"url":83,"name":65,"@type":85,"image":86,"author":91,"headline":65,"publisher":94,"fileFormat":97,"inLanguage":63,"description":67,"dateModified":98,"datePublished":99,"encodingFormat":97,"isAccessibleForFree":100,"interactionStatistic":101},"DigitalDocument",{"url":87,"@type":88,"width":89,"height":90},"https://docshare.wps.com/thumbnails/monetary-policy-and-the-federal-funds-futures-market/326083.png","ImageObject",300,407,{"name":92,"@type":93},"Theodora","Person",{"url":74,"name":95,"@type":96},"DocShare","Organization","application/pdf","2026-11-10","2026-09-21",true,{"@type":102,"interactionType":103,"userInteractionCount":52},"InteractionCounter",{"@type":104},"ViewAction",{"@type":106,"mainEntity":107},"FAQPage",[108,114,118],{"name":109,"@type":110,"acceptedAnswer":111},"How did the FOMC’s policy actions change the federal funds rate after January 1994?","Question",{"text":112,"@type":113},"After a 15-month period with no policy action, the FOMC raised the federal funds rate seven times since January 1994, moving it from 3 percent to 6 percent.","Answer",{"name":115,"@type":110,"acceptedAnswer":116},"What role do fed funds futures play in reflecting expectations of future policy actions?",{"text":117,"@type":113},"Fed funds futures prices embed predictions of the monthly average daily fed funds rate, effectively expressing market expectations of the FOMC’s intended rate and future policy moves.",{"name":119,"@type":110,"acceptedAnswer":120},"How is the implied fed funds rate derived from a futures contract’s settlement price?",{"text":121,"@type":113},"The implied rate can be obtained from the settlement price by calculating 100 minus the monthly arithmetic average of the daily effective fed funds rate for the contract month.","https://schema.org",{"og:url":83,"og:type":124,"og:title":65,"og:site_name":95,"og:description":67},"article",{"robots":126,"canonical":83},"index,follow",{"doc_id":128,"site_id":62},326083,1790251487,{"code":4,"msg":5,"data":131},{"doc_id":128,"user_id":132,"nickname":92,"user_avatar":133,"doc_module":4,"category_id":39,"category_name":40,"doc_title":65,"doc_description":67,"doc_content":134,"file_id":135,"file_url":136,"file_type":137,"file_size":138,"view_count":52,"is_deleted":4,"is_public":8,"is_downloadable":8,"audit_status":8,"page_count":24,"language":139,"language_code":63,"site_id":62,"html_lang":63,"table_of_contents":140,"faqs":141,"seo_title":142,"seo_description":67,"update_tm":143,"read_time":144,"preview_page_count":4},687197207919,"https://ap-avatar.wpscdn.com/avatar/a000253d6f5f7c60be?x-image-process=image/resize,m_fixed,w_180,h_180&k=1779446848396160552","by John B.Carlson and Jean M.McIntire  \nE  \nvents rarely unfold exactly as weforesee them.In the monetary policyarena,for example,the timing and inten-sity ofspecific actions can be difficult toanticipate.Following a 15-month periodduring which no policy action was taken,the Federal Open Market Committee(FOMC),the central bank's policymak-ing arm,embarked on a series of movesthat has raised money market interestrates seven times since January 1994.  \nMore specifically,FOMC actions liftedthe federal funds rate—the interest ratebanks charge each other for ovenightloans—from 3 percent to 6 percent(seefigure 1).Four of these actions wereaccompanied by increases in the dis-count rate—the rate the Federal Reservecharges banks that borrow at the dis-count window.At 5%percent,the dis-count rate is now 2%percentage pointsabove where it stood before the series ofpolicy moves was initiated.  \nAs the operating target of the FOMC,the fed funds rate is a benchmark forovernight lending rates and hence a keyrate against which to hedge or even tospeculate.In 1988,the Chicago Board ofTrade began trading an interest-ratefutures contract based on averagemonthly fed funds rates(see box).A30-day fed funds futures contract may bewritten for any calendar month up to 24months ahead.(Contracts for six monthsahead or more are less common.)Themarket price of fed funds futures embod-  \n# Monetary Policy and the FederalFunds Futures Market\n\nies a prediction of the monthly averageof the daily fed funds rate.  \nBecause market participants understand  \nthat deviations of the overnight fundsrate from its desired level will tend toaverage out over the span of a month,the implied rate is essentially the mar-ket's expectation of the FOMC'sintended rate.Thus,the fed funds con-tract offers in fairly precise terms a mar-ket indicator of expected future policyactions.In this Economic Commentarywe review the circumstances that led tothe series of policy actions initiated inJanuary 1994 and examine how well thefed funds futures market anticipated thepolicy moves.We also assess how theoutlook of the fed funds futures markethas changed dramatically in 1995.  \n## ■ The Practice of\n\nMonetary Policy  \nParticipants in futures markets haveevery incentive to understand the deter-minants of the price for the commodityor financial instrument on which thecontract is written.Fed funds futures areperhaps unique in the sense that themonthly-average fed funds rate is deter-mined by a deliberative process—a deci-sion of the FOMC.Although the fedfunds rate varies substantially on a dailybasis,its monthly average is generallyclose to the intended range that theFOMC communicates to the New YorkTrading Desk.²Because the level of thefed funds rate is essentially determined  \nHow well did the federal funds futuresmarket anticipate recent monetarypolicy actions?The authors examinethe predictive content of fed fundsfutures rates,which provide the Fed-eral Open Market Committee with aclear reading of market expectationsfor policy,in the context of 1994 policymoves and analyze the fed fundsfutures market outlook in early 1995.  \nby policy decisions,the fed funds futuresrate would be expected to have predic-tive value for the size and timing offuture policy actions.  \nTo appreciate the behavior that leads tochanges in interest rates,it is helpful tounderstand the context in which U.S.monetary policy decisions are made.Ultimately,monetary policy seeks toachieve the highest possible advance inAmericans'living standards over time.³This goal can best be accomplished ifpolicy actions do not allow concernsabout the variability of the purchasingpower of money to become a factor inprivate decisions.In his February 1995testimony before Congress,FederalReserve Chairman Alan Greenspanstated,“Price stability enables house-holds and firms to have the greatestfreedom possible to do what they dobest—to produce,invest,and consumefficiently.”  \n## WHAT THE FUTURES MARKETEXPECTS FOR POLICY\n\nAfter each trading day","cbCaihiUsL6U7j6u","https://ap.wps.com/l/cbCaihiUsL6U7j6u","pdf",1260385,"English","# Monetary Policy and the Federal Funds Futures Market\n## The Practice of Monetary Policy\n## What the Futures Market Expects for Policy\n## Policy Actions and the Recent Run-up in the Fed Funds Rate","[{\"question\":\"How did the FOMC’s policy actions change the federal funds rate after January 1994?\",\"answer\":\"After a 15-month period with no policy action, the FOMC raised the federal funds rate seven times since January 1994, moving it from 3 percent to 6 percent.\"},{\"question\":\"What role do fed funds futures play in reflecting expectations of future policy actions?\",\"answer\":\"Fed funds futures prices embed predictions of the monthly average daily fed funds rate, effectively expressing market expectations of the FOMC’s intended rate and future policy moves.\"},{\"question\":\"How is the implied fed funds rate derived from a futures contract’s settlement price?\",\"answer\":\"The implied rate can be obtained from the settlement price by calculating 100 minus the monthly arithmetic average of the daily effective fed funds rate for the contract month.\"}]","Monetary Policy and the Federal Funds Futures Market | PDF",1789972164,13]