Monetary policy is conducted in an environment of uncertainty. This paper presents a model where the central bank uses real time data from the bond market together with standard macroeconomic indicators to infer the current state of the economy more efficiently, while taking into account that...

Introducing private information into the dynamic pricing decision of firms by adding an idiosyncratic component to marginal cost can help explain two stylised facts about price changes: Aggregate inflation responds gradually and with inertia to shocks at the same time as individual price changes...