To determine which FOMC rate-setting actions were unexpected, as well as the magnitude of the policy surprises, we followed Kuttner (2001) and compared the rate actually set by the FOMC at each meeting to the market’s expectation of that rate, as inferred from the prices of federal funds futures contracts.
In addition, the decline in labor input as a result of demographic trends and the decrease in working hours as the economy matured and shorter working hours became more common have put downward pressure on the potential growth rate.