Does Publication of Interest Rate Paths Provide Guidance?

Gisle Natvik, Dagfinn Rime and Olav Syrstad

No 2019/16, Working Paper from Norges Bank

Abstract: Does the central bank practice of publishing interest rate projections (IRPs) improve how market participants map new information into future interest rates? Using high-frequent data on Forward Rate Agreements (FRAs) we compute market forecast errors; differences between expected future interest rates and ex post realizations. We assess their change in narrow windows around monetary policy announcements and macroeconomic releases in Norway and Sweden. Overall, communication of future policy plans do not improve markets’ response to information, irrespective of whether or not IRPs are in place. A decomposition of market reactions into responses to the current monetary policy action (“target”) and responses to signals about the future (“path”), reveals that only policy actions lead to improvements in market forecasts.

Keywords: monetary policy; interest rate paths; forward guidance; high-frequency data; forecasts (search for similar items in EconPapers)
JEL-codes: O13 Q33 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2019-10-03
New Economics Papers: this item is included in nep-cba and nep-mon
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Citations: View citations in EconPapers (4)

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https://hdl.handle.net/11250/2652984

Related works:
Journal Article: Does publication of interest rate paths provide guidance? (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:bno:worpap:2019_16

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