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

Author

Listed:
  • Ehrmann, Michael
  • Gaballo, Gaetano
  • Hoffmann, Peter
  • Strasser, Georg

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

Suggested Citation

  • Ehrmann, Michael & Gaballo, Gaetano & Hoffmann, Peter & Strasser, Georg, 2019. "How to signal the future path of interest rates? The international evidence on forward guidance," Research Bulletin, European Central Bank, vol. 61.
    • Handle: RePEc:ecb:ecbrbu:2019:0061:
    Note: 203739
    as

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    Citations

    RePEc Biblio mentions

    As found on the RePEc Biblio, the curated bibliography for Economics:
    1. > Macroeconomics > Monetary Theory

    More about this item

    Keywords

    central bank communication; disagreement; forward guidance; macroeconomic news;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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