Author(s):	Michael Ehrmann, Gaetano Gaballo, Peter Hoffmann, Georg Strasser
Publication Date:	September 2019
Date Revised:	September 2019
Keyword(s):	central bank communication, disagreement, forward guidance, heterogeneous beliefs, Macroeconomic news
JEL(s):	D83, E43, E52, E58
Programme Areas:	Monetary Economics and Fluctuations
Link to this Page:	cepr.org/active/publications/discussion_papers/dp.php?dpno=13977

Central banks have used different types of forward guidance. This paper reports cross-country evidence showing that, in general, forward guidance mutes the response of government bond yields to macroeconomic news. However, calendar-based guidance with a short horizon counter-intuitively raises it. Using a stylized model where agents learn from market signals, it shows that the public release of more precise information about future rates lowers the informativeness of market signals and, as a consequence, may increase uncertainty and amplify the reaction of expectations to macroeconomic news.