Our findings support the view that FOMC statements have proven a powerful tool for affecting market expectations about the future course of the federal funds rate.6 Certainly, the market’s expectations for year-ahead rates respond to unexpected changes in the FOMC’s target for the federal funds rate, as we would expect.
However, as most rate actions are well anticipated by financial markets, changes in  3  Sack has very recently left the Board. Our paper was commissioned by the Brookings Institution and was presented there on September 9, 2004. It will be published in the Brookings Papers on Economic Activity.