The federal funds futures rate naturally embodies the market’s expectation of the average behavior of the federal funds rate. But, as the authors explain, analysts cannot attempt to identify Fed policy from the behavior of the federal funds futures rate without making somewhat arbitrary additional assumptions. The authors investigate the predictive accuracy of a rule based on the federal funds futures rate from October 1988 through August 1997 using an assumption that is sufficient for partially identifying when the market is expecting a Fed action but not for predicting the magnitude of the action. Their forecasting rule correctly predicts a target change at the one-month horizon only about one-third of the time. They conclude that more research is needed, especially in light of the FOMC’s recent practice of disclosing policy decisions immediately after FOMC meetings.