Financial Market Reactions to Interest Rate Announcements and Macroeconomic Data Releases

Reactions of financial prices to news contain information about market beliefs and expectations. This article looks at reactions of a selection of UK interest rate, equity and exchange rate contracts to macroeconomic data releases and interest rate changes before and after the Bank of England was granted operational independence in May 1997. We find some differences in the nature of the reactions in the two periods, and attempt to draw out the implications for market perceptions of monetary policy