LAUSR

Abstract Ehrmann et al. contains very useful international evidence on the efficacy of forward guidance at anchoring expectations of future policy rates at the ELB. The authors give one finding particular attention, that short-term time-consistent forward guidance raises the responses of expected future policy rates to macroeconomic data surprises. I argue that this empirical result should be interpreted with caution. Nevertheless, the paper’s development of a novel theoretical explanation for it based on financial market prices’ imperfect information aggregation merits the reader’s attention. I conjecture that such “imperfections” are welfare improving in standard New Keynesian models.