Fed & Rates

How to read it

The FOMC sets a target range for the overnight rate eight times a year. Fed funds futures settle on the average effective rate in their month, so the change from one month to the next shows what the market expects each meeting to do. A curve whose short end sits above its long end is inverted: both spreads above turned negative before most US recessions since the 1970s, with long and variable lags. The real yield is what a Treasury pays after inflation; the breakeven is the inflation rate at which inflation-protected and ordinary Treasuries pay the same.

Sources and method

Treasury par yields and real yields from the US Treasury, with FRED as backup; FRED posts the curve a day later, so the Treasury's figures come first. Spreads, the fed funds rate, inflation, unemployment and breakevens from FRED. The target range from the Federal Reserve via FRED and the FOMC calendar from the Federal Reserve. Meeting probabilities are an Andra Markets calculation from CBOT 30-day fed funds futures, following the method CME Group publishes: each contract settles on its month's average effective rate, so the rate after a meeting is the month's implied rate with the days before the decision taken out. Futures carry a risk premium, so they are a guide to expectations, not a forecast. The futures and the intraday yield points refresh every 15 minutes while the NYSE is open; the rest once a day. Series older than two years are shown one point a week.

For information only. Not investment advice.