The Predictability of Global Monetary Policy Surprises

Christopher Cotton

No 25-14, Working Papers from Federal Reserve Bank of Boston

Abstract: Markets systematically misprice interest rate changes around central bank announcements. I show that the strongest predictor of this mispricing is recent change in global interest rates. More specifically, a 1 percentage point increase in global short-term interest rates in the 15 days before a central bank meeting is associated with a 12-basis point surprise increase in short-term rates at that meeting. I demonstrate that this is the result of markets underreacting to signals coming from the global interest rate cycle.

Keywords: monetary policy surprise; central bank; global interest rate cycle; predictability (search for similar items in EconPapers)
JEL-codes: E43 E52 E58 (search for similar items in EconPapers)
Pages: 54
Date: 2025-11-01
New Economics Papers: this item is included in nep-ifn, nep-mac and nep-mon
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.bostonfed.org/publications/research-de ... olicy-surprises.aspx Summary (text/html)
https://www.bostonfed.org/-/media/Documents/Workingpapers/PDF/2025/WP2514.pdf Full text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedbwp:102186

Ordering information: This working paper can be ordered from

DOI: 10.29412/res.wp.2025.14

Access Statistics for this paper

More papers in Working Papers from Federal Reserve Bank of Boston Contact information at EDIRC.
Bibliographic data for series maintained by Catherine Spozio ().