"Federal Reserve Information and the Behavior of Interest Rates"

Wednesday, August 4, 2010
"This paper tests for the existence of asymmetric information between the Federal Reserve and the public by examining Federal Reserve and commercial inflation forecasts. It demonstrates that the Federal Reserve has considerable information about inflation beyond what is known to commercial forecasters. It also shows that monetary-policy actions provide signals of the Federal Reserve's information and that commercial forecasters modify their forecasts in response to those signals. These findings may explain why long-term interest rates typically rise in response to shifts to tighter monetary policy." Read more. "Federal Reserve Information and the Behavior of Interest Rates" Christina Romer and David Romer The American Economic Review, Vol. 90, No. 3 (Jun., 2000), pp. 429-457. Image by jscreationzs / FreeDigitalPhotos.net.