02366cas a2200265 a 4500 AALejournalIMF021318 230101c9999 xx r poo 0 0eng d 5.00 USD 9781513559650 1018-5941 BD-DhAAL BD-DhAAL Gruss, Bertrand. Monetary Policy Surprises and Inflation Expectation Dispersion / Bertrand Gruss, Sandra Lizarazo, Francesco Grigoli. Washington, D.C. : International Monetary Fund, 2020. 1 online resource (38 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students Anchoring of inflation expectations is of paramount importance for central banks' ability to deliver stable inflation and minimize price dispersion. Relying on daily interest rates and inflation forecasts from major financial institutions in the United States, we calculate monetary policy surprises of individual analysts as the unexpected changes in the federal funds rate before the meetings of the Federal Reserve Board. We then assess the effect of monetary policy surprises on the dispersion of inflation expectations, a proxy for the extent of anchoring, which is based on the same analysts' inflation projections submit-ted after the Fed meetings. With an identification strategy that hinges on a tight window around the Fed meetings, we find that monetary policy surprises lead to an increase in the dispersion of inflation expectations up to nine months after the policy meeting. We rationalize these results with a partial equilibrium model that features rational expectations and sticky information. When we allow the degree of information rigidity to depend on the realization of firm-specific shocks, the theoretical results are qualitatively consistent and quantitatively close to the empirical evidence. Mode of access: Internet Grigoli, Francesco. Lizarazo, Sandra. IMF Working Papers; Working Paper ; No. 2020/252 Full text available on IMF http://elibrary.imf.org/view/journals/001/2020/252/001.2020.issue-252-en.xml IMF e-Library