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FOMC Forecasts as a Focal Point for Private Expectations
Author(s) -
HUBERT PAUL
Publication year - 2014
Publication title -
journal of money, credit and banking
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.763
H-Index - 108
eISSN - 1538-4616
pISSN - 0022-2879
DOI - 10.1111/jmcb.12142
Subject(s) - inflation (cosmology) , dispersion (optics) , economics , monetary policy , open market operation , context (archaeology) , monetary economics , point (geometry) , macroeconomics , geography , physics , geometry , mathematics , archaeology , theoretical physics , optics
We explore empirically the theoretical prediction that public information acts as a focal point in the context of the U.S. monetary policy. We aim at establishing whether the publication of Federal Open Market Committee (FOMC) inflation forecasts affects the cross‐sectional dispersion of private inflation expectations. Our main finding is that publishing FOMC inflation forecasts has a negative effect on the cross‐sectional dispersion of private current‐year inflation forecasts. This effect is found to be robust to another survey data set and to various macroeconomic controls. Moreover, we find that the dispersion of private inflation forecasts is not affected by the dispersion of views among FOMC members.