The implication is that the impact of monetary policy can be more effectively increased by influencing market expectations regarding future policy than by independently raising or lowering interest rates. If a change in shortterm interest rates is considered merely temporary, it will not alter the level of medium- or long-term interest rates, and its overall influence on the economy will be limited.
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.