Staff Working Paper No. 1,014
By Federico Di Pace, Giacomo Mangiante and Riccardo Masolo
This paper studies whether the distribution of firm expected price changes reacts to Bank of England monetary policy announcements by comparing the responses to the Decision Maker Panel Survey filed immediately before and after a Monetary Policy Committee meeting. We find that firm price expectations respond to changes in the monetary policy rate in line with economic theory. The degree to which firms respond to monetary policy announcements varies over time and is more pronounced for the left tail of their expected price distribution. Finally, we show that the response of aggregate prices is consistent with firms acting on the pricing plans they report in their survey responses.
This version was updated in March 2024.
Do firm expectations respond to monetary policy announcements?
