How big is the toolbox of a central banker? : managing expectations with policy-rate forecasts ; evidence from Sweden

Magnus Åhl

Some central banks have decided to publish forecasts of their policy rates. Can such forecasts manage market expectations of future policy rates? I use regression analysis on Swedish data to conclude that the answer is yes. The published Riksbank forecasts affect expectations of the future repo rate up to a horizon of approximately a year and a half. However, the response of market expectations to a surprise in the announced repo-rate path is not one-to-one, but is estimated to be less than half of the surprise and decreasing with the forecast horizon.

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Year of publication:	May 2017
Authors:	Åhl, Magnus
Publisher:	Stockholm : Sveriges Riksbank
Subject:	Policy-rate path \| monetary-policy expectations \| Schweden \| Sweden \| Geldpolitik \| Monetary policy \| Prognoseverfahren \| Forecasting model \| Erwartungsbildung \| Expectation formation \| Zentralbank \| Central bank \| Theorie \| Theory \| Inflationserwartung \| Inflation expectations