Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/246097 
Year of Publication: 
2019
Series/Report no.: 
Working Paper No. 16/2019
Publisher: 
Norges Bank, Oslo
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.
Subjects: 
monetary policy
interest rate paths
forward guidance
high-frequency data
forecasts
JEL: 
D72
O13
Q33
Persistent Identifier of the first edition: 
ISBN: 
978-82-8379-113-6
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Working Paper
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