tailieunhanh - Public attitudes to inflation and interest rates

More sophisticated econometric procedures have been used to estimate the market’s reaction to Federal Reserve policy, focusing on the unanticipated element of the actions. Using a Vector Autoregression (VAR) tomodelmonetary policy, for example, Edelberg and Marshall (1996) found a large, highly significant response of bill rates to policy shocks, but only a small, marginally significant response of bond rates. Other examples of the VAR approach include Evans and Marshall (1998) and Mehra (1996). In an effort to model the discrete nature of target rate changes, Demiralp and Jorda (1999) examined the response of interest rates using an autoregressive conditional hazard (ACH) model to forecast the timing of changes. | 208 Quarterly Bulletin 2007 Q2 Public attitudes to inflation and interest rates By Ronnie Driver of the Bank s Monetary Assessment and Strategy Division and Richard Windram of the Bank s Inflation Report and Bulletin Division. Since 2001 the Bank of England has published an annual article discussing the results from the survey of public attitudes to inflation carried out by GfK NOP on behalf of the Bank. This article analyses the results of surveys up to February 2007. Given the relevance of inflation expectations to the current inflation outlook this year s article focuses on the pickup in the general public s inflation expectations between 2005 and 2006 and the factors that may have contributed to that rise. It also considers the interactions with the public s attitudes to interest rates. Responses to other questions in the survey are discussed in the annex. Introduction In May 1997 the Government gave the Bank of England operational responsibility for setting interest rates to meet its inflation target. The Government s current remit requires the Bank to target an annual inflation rate of 2 based on the consumer prices index CPI . The level of interest rates deemed appropriate to meet this target is decided on a monthly basis by the Monetary Policy Committee MPC . Monetary policy is likely to be most effective if people understand and support the goal of price stability as well as the use of interest rates to achieve it. The Bank uses a variety of methods to raise public awareness and to explain the decisions of the MPC. These include the publication of minutes of the MPC s meetings the Inflation Report and Quarterly Bulletin appearances by MPC members before parliamentary committees speeches media interviews and regional visits by MPC members the work of the Bank s regional Agents and a range of educational material for schools. To assess the degree of public awareness GfK NOP carries out a quarterly survey on behalf of the Bank. This survey includes among .