Template-Type: ReDIF-Paper 1.0
Author-Name: Alessandro Barbera
Author-X-Name-First: Alessandro 
Author-X-Name-Last: Barbera
Author-Name: Dora Xia
Author-X-Name-First: Dora 
Author-X-Name-Last: Xia
Author-Name: Sonya Zhu
Author-X-Name-First: Sonya 
Author-X-Name-Last: Zhu
Title: The term structure of inflation forecasts disagreement and monetary policy transmission
Abstract: The term structure of inflation forecasts disagreement in the US can be summarized by two components: disagreement about the trend inflation, and disagreement about the cyclical inflation. While the former has identical impacts on forecasts disagreement across forecasting horizons, the latter has more muted impacts on forecasts disagreement at longer forecasting horizons. Only the cyclical inflation disagreement has a significant impact on monetary policy efficacy. High  disagreement about the cyclical inflation undermines the transmission of monetary policy to both real economy and financial markets. Active communication from the Federal Reserve with the general public is a useful tool to reduce inflation disagreement, especially disagreement about the cyclical inflation.
Creation-Date: 2023-08
File-URL: https://www.bis.org/publ/work1114.pdf
File-Format: Application/pdf
File-Function: Full PDF document
File-URL: https://www.bis.org/publ/work1114.htm
File-Format: text/html
Number: 1114
Keywords: inflation expectation; forecasts disagreement; monetary policy transmission
Classification-JEL: E31, E37, E52
Handle: RePEc:bis:biswps:1114