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How Well Does the Federal Funds Futures Rate Predict the Future Federal Funds Rate?, October 1, 2001

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How Well Does the Federal Funds Futures Rate Predict the Future Federal Funds Rate?, October 1, 2001

DATE: October 1, 2001

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ABSTRACT: Contrary to popular belief, federal funds futures rates do not tell us precisely where the market thinks federal funds rates will be in the future. On average, futures rates overpredict future fed funds rates, and, depending on whether fed funds rates are falling or rising, the futures rate may consistently overestimate or underestimate the future fed funds rates. To obtain a reliable estimate of the future fed funds rate, one must adjust the fed funds futures rate appropriately to account for the bias and past movements of the fed funds rate.

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Federal Reserve Bank of Cleveland. "How Well Does the Federal Funds Futures Rate Predict the Future Federal Funds Rate?, October 1, 2001," Economic Commentary (Federal Reserve Bank of Cleveland) (October 1, 2001). https://fraser.stlouisfed.org/title/4515/item/627749, accessed on May 1, 2024.

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NOTE: Note from title page: Printed December 2001

PUBLISHER: Federal Reserve Bank of Cleveland

PLACE: Cleveland

DIGITAL COPY SOURCE: Federal Reserve Bank of Cleveland

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RIGHTS: In Copyright (InC)

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