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The behavior of federal funds futures prices over the monetary policy cycle
The federal funds futures market enables market participants to both hedge interest rate risk and speculate on interest rate movements. Prices of federal funds futures also reveal market participants' expectations about changes in Federal Open Market Committee (FOMC) policy. This information allows monetary policymakers to assess the degree to which asset prices already reflect potential policy moves and these prices' likely reaction to policy changes that deviate from market expectations. ; This article examines the relationship between U.S. monetary policy changes and futures market ...