How to signal the future path of interest rates? The international evidence on forward guidance

Michael Ehrmann, Gaetano Gaballo, Peter Hoffmann and Georg Strasser

Research Bulletin, 2019, vol. 61

Abstract: Forward guidance, i.e. communication by a central bank about the likely future path of interest rates, usually reduces uncertainty. But it matters how this is done in practice, because forward guidance with a short time horizon can raise uncertainty. This occurs if the forward guidance impairs the aggregation of private information in financial markets, thus making market prices less informative. JEL Classification: D83, E43, E52, E58

Keywords: central bank communication; disagreement; forward guidance; macroeconomic news (search for similar items in EconPapers)
Date: 2019-07
Note: 203739
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