Effects of explicit FOMC policy rate guidance on interest rate expectations

•We quantify the impact of explicit FOMC policy rate guidance on interest rate expectations.•Explicit policy rate guidance announcements significantly reduced implied interest rates.•Explicit FOMC policy rate guidance led to a significant flattening of the yield curve.

We quantify the impact of explicit FOMC policy rate guidance announcements at the zero lower bound on Eurodollar interest rate futures. We find that they significantly reduced implied interest rates and led to a flattening of the yield curve.