What can we learn about monetary policy transparency from financial market data?

In this paper we investigate the impact of UK macroeconomic news announcements on selected futures contracts and exchange rates. We include a wide set of scheduled public news announcements in our study, including official interest rate decisions. We investigate whether the reaction to these announcements has changed since the Bank of England was granted operational independence in May 1997. Our results indicate that there may well have been changes in the way that financial markets incorporate key economic data into securities prices. In particular, we document an increase in the speed of the reaction to interest rate announcements, but also some evidence of a fall in the size of the full reaction.