Munich Personal RePEc Archive

Forward Guidance and the private forecast disagreement – case of Poland

Rybacki, Jakub (2019): Forward Guidance and the private forecast disagreement – case of Poland.

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During the period of policy easing in 2013 and prospective tightening in 2017-2019 the National Bank of Poland (NBP) applied the forward guidance to manage expectations of market participants. The goal of such a policy was to lower the uncertainty related to the future decisions of the Monetary Policy Council. We attempt to verify whether the central bank’s communication indeed reduced disagreement, based on the results of the professional forecasters’ survey. We found that the forward guidance policy introduced in 2013 lowered the perceived interest rate risk in both one-year and two-year horizons. On the other hand, abandoning the policy in 2014 increased the disagreement in the disproportionately large manner. The more pronounced forward guidance reintroduced in 2017 again allowed to reduce short-term uncertainty. However, it took over a year to strengthen the impact reducing the disagreement especially in case of two-year forecasts. The forward guidance most likely prevented increase of disagreement during the so called NBP image crisis in the late 2018 and in the first quarter of 2019. Overall our research highlights that it is relatively easy to lose confidence with ill-considered communication, but building credibility requires systematic long work.

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