Interest rate forecasts in times of financial crisis: What might be interesting to know?

•We examine survey forecasts for the 3M EURIBOR from professional analysts.•A long-run relationship between the interest rate and its survey forecast exists.•Financial crisis leads to a break point within the long-run relationship.•Uncertainty is shown by higher dispersion of professional analysts' forecasts.•Liquidity constraints and worsening economic conditions help to explain uncertainty.

As a basic requirement to be a feasible predictor for the shape of the yield curve survey forecasts should be cointegrated with the realized path of interest rates. The short end of the curve is determined to a large extend by the monetary policy of central banks. Especially in times of financial crisis uncertainty about the coming policies rises and leads to higher dispersion within survey forecasts as well as structural breaks within the long-run relationship. Using a simple empirical model it can be stated that emergence of uncertainty may be explained by worsening economic sentiment or liquidity constraints in the money market.