Abnormal energy price movements prior to FOMC announcements

We investigate energy prices during the Federal Open Market Committee (FOMC) announcement periods. This study shows that the energy market has experienced abnormal price movements before the scheduled FOMC announcements, which... [ view full abstract ]

We investigate energy prices during the Federal Open Market Committee (FOMC) announcement periods. This study shows that the energy market has experienced abnormal price movements before the scheduled FOMC announcements, which are proportional to FOMC’s monetary policy decisions at the following day. They are affected by expected monetary policy rate changes but not by unexpected changes. We also find that the volatility of the energy prices increases in the pre-FOMC dates only if the expected policy rate change is negative, which can be explained by the asymmetric volatility effect.