Title: Effects of monetary policy decisions on professional forecasters' expectations and expectations uncertainty
Authors: Sami Oinonen - Bank of Finland (Finland)
Maritta Paloviita - Bank of Finland (Finland) [presenting]
Matti Viren - University of Turku (Finland)
Abstract: The aim is to examine how professional forecasters' expectations and expectation uncertainty have reacted to the ECB interest rate decisions and non-conventional monetary policy measures during the period 1999-2017. The analysis makes use of a conventional dif-in-dif type set up. It indicates that expectations have been sensitive to policy actions, but is not clear that these forecasters' reactions follow some basics of economic theory. This is true both for the response of expectations to policy actions and the relationship between the level of the policy rate and inflation and output point forecasts. Moreover, short- and long term reaction are sometimes puzzlingly different. The most interesting results are obtained with the subjective forecast uncertainty measures which seem to be surprisingly sensitive to policy measures. Uncertainty measures, including long-term inflation uncertainty are problematic from the point of view of anchoring inflation expectations to the inflation target.