Do firm expectations respond to monetary policy announcements?

Staff working papers set out research in progress by our staff, with the aim of encouraging comments and debate.
Published on 10 February 2023

Staff Working Paper No. 1,014

By Federico Di Pace, Giacomo Mangiante and Riccardo Masolo

We study whether firms’ expectations react to the Bank of England’s monetary policy announcements by comparing the responses to the Decision Maker Panel survey filed immediately before and after a Monetary Policy Committee meeting. On the one hand, we find that firms’ expectations and uncertainty about their own business for the most part do not respond to high-frequency monetary policy surprises. On the other hand, announced changes in the monetary policy rate induce firms to revise their price expectations, with rate hikes inducing a reduction in price expectations and uncertainty surrounding them.

Do firm expectations respond to monetary policy announcements?