FOMC Communications and the Predictability of Near-Term Policy Decisions

Abstract

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.