Furor over the Fed : Presidential Tweets and Central Bank Independence

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We illustrate how market data can be informative about the interactions between monetary and fiscal policy. Federal funds futures are private contracts that reflect investor’s expectations about monetary policy decisions. By relating price movements of these contracts with President Trump’s tweets on monetary policy, we explore how markets have perceived presidential attempts to influence monetary policy decisions. Overall, our results indicate markets expected the Federal Reserve to adjust monetary policy in the direction suggested by President Trump.