The Overdelivery Premium: When Monetary Policy Decisions Exceed Market Expectations

Michael Ehrmann and Paul Hubert

No 21241, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Monetary policy effects are usually identified through surprises. We test whether their effects differ when central banks exceed market expectations (“overdelivery†) versus fall short (“underdelivery†). Using a panel of 14 advanced economies over three decades, we document that short-term interest rates respond up to ten times more to overdelivery surprises. Overdelivery triggers macroeconomic forecast revisions consistent with central bank information effects, while underdelivery generates standard monetary transmission responses. In contrast, overdelivery does not shift perceptions of policymakers’ inflation and output responsiveness differently than underdelivery. The asymmetry does not extend to macroeconomic data surprises, ruling out reference-dependent preferences as a cause.

JEL-codes: D84 E44 E52 (search for similar items in EconPapers)
Date: 2026-03
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