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Monetary policy actions, macroeconomic data releases, and inflation expectations

  • Kevin L. Kliesen
  • Frank A. Schmid

This article analyzes how announced surprises in monetary policy actions and macroeconomic data releases affect the average rate of inflation that economic agents expect to prevail over the 10-year period following the surprise. The analysis also addresses the effect of Federal Reserve communication and surprises in monetary policy actions on perceived inflation risk over this 10-year period. The study shows that surprises in macroeconomic data releases and monetary policy actions indeed affect the expected rate of inflation. Further, there is evidence that surprises in monetary policy actions increase perceived inflation risk, whereas Federal Reserve communication reduces it.

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File URL: http://research.stlouisfed.org/publications/review/04/05/Kliesen.pdf
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Article provided by Federal Reserve Bank of St. Louis in its journal Review.

Volume (Year): (2004)
Issue (Month): May ()
Pages: 9-22

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Handle: RePEc:fip:fedlrv:y:2004:i:may:p:9-22:n:v.86no.3
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  1. Pierluigi Balduzzi & Edwin J. Elton & T. Clifton Green, 1997. "Economic News and the Yield Curve: Evidence from the U.S. Treasury Market," New York University, Leonard N. Stern School Finance Department Working Paper Seires 98-005, New York University, Leonard N. Stern School of Business-.
  2. Refet S. Gürkaynak & Brian Sack & Eric Swanson, 2003. "The excess sensitivity of long-term interest rates: evidence and implications for macroeconomic models," Proceedings, Federal Reserve Bank of San Francisco, issue Mar.
  3. Michael J. Fleming & Eli M. Remolona, 1997. "What moves the bond market?," Research Paper 9706, Federal Reserve Bank of New York.
  4. William R. Emmons, 2000. "The information content of Treasury inflation-indexed securities," Review, Federal Reserve Bank of St. Louis, issue Nov, pages 25-38.
  5. Gurkaynak, Refet S. & Sack, Brian T. & Swanson, Eric P., 2007. "Market-Based Measures of Monetary Policy Expectations," Journal of Business & Economic Statistics, American Statistical Association, vol. 25, pages 201-212, April.
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