The 'announcement effect' of monetary policy refers to:
A) the destabilising effect of the RBA governor announcing his retirement.
B) the media outcry whenever banks announce an increase in interest rates.
C) the impact on expectations resulting from public announcement of changes to the RBA's interest rate target.
D) the fallout in 1997 when the Wallis Inquiry findings were released.

Question

Quizplus · Accepted Answer

The 'announcement effect' refers to the impact on market expectations and economic behavior that occurs when the central bank publicly announces changes to its interest rate target, influencing financial markets and economic decisions even before the actual policy change is implemented.

The 'Announcement Effect' of Monetary Policy Refers To