Scandinavian Working Papers in Economics

Working Paper Series,
Sveriges Riksbank (Central Bank of Sweden)

No 339: How big is the toolbox of a central banker? Managing expectations with policy-rate forecasts: Evidence from Sweden

Magnus Åhl ()
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Magnus Åhl: Monetary Policy Department, Central Bank of Sweden, Postal: Sveriges Riksbank, SE-103 37 Stockholm, Sweden

Abstract: 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.

Keywords: Policy-rate path; monetary-policy expectations

JEL-codes: E52; E58; G14

40 pages, May 1, 2017

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