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Title: Inflation forecasts disagreement and monetary policy effectiveness Authors:  Dora Xia - Bank for International Settlements (Switzerland) [presenting]
Sonya Zhu - Bank for International Settlements (Switzerland)
Abstract: The term structure of inflation forecasts disagreement is decomposed into disagreement around trend inflation and disagreement around cyclical inflation. While the former has identical impact on forecasts across forecasting horizons, the latter has more muted impact on forecasts at longer-term horizons. We find that the two kinds of disagreement have different impact on monetary policy transmission. Only trend inflation disagreement has a significant impact on monetary policy efficacy. When the trend inflation disagreement is high, monetary policy tightening is ineffective in reducing price pressure.