Using the Federal Funds Futures Market to Predict Monetary Policy Actions

How well does the market for Federal Funds Futures predict? Statistical estimates of the market’s efficiency in predicting FOMC policy actions indicate that the forecasts contain useful information and are unbiased at the usual 5 percent level. That finding is of interest because it means that much of the costly information formerly acquired by specialized Fed watchers can now be obtained inexpensively by a nonspecialist.