Financial market reaction to monetary policy surprises

Rachael Grant and Kate Poskitt
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Kate Poskitt: Reserve Bank of New Zealand, http://www.rbnz.govt.nz

No AN2024/08, Reserve Bank of New Zealand Analytical Notes series from Reserve Bank of New Zealand

Abstract: A new Analytical Note measures monetary policy surprises and assesses their effects on financial market instruments. Understanding the effects of monetary policy surprises on financial markets is key given the importance of central bank communication and the role financial markets play in the transmission of monetary policy. The Analytical Note shows that material monetary policy surprises – defined as instances where market pricing for the OCR immediately prior to an announcement is more than 5 basis points different from the announced rate – are relatively rare. Since 2006, fewer than 1 in 5 OCR announcements resulted in a material monetary policy surprise.

Pages: 29 pp.
Date: 2024-09
New Economics Papers: this item is included in nep-cba and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:nzb:nzbans:2024/08

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