On the other hand, if market participants form expectations that a change in short-term interest rates will be long-lasting, mediumto long-term interest rates will respond accordingly, thereby increasing the overall impact on the economy.
When expectations are formed about future changes in short-term interest rates and these are fully incorporated in the formation of medium- to long-term interest rates, a number of points are relevant. First, the intended effect of a policy change is achieved as soon as it is anticipated, rather than at the point when it is actually enacted.