Economic Letter
Brief summaries of SF Fed economic research that explain in reader-friendly terms what our work means for the people we serve.
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Fed Communications and Inflation Expectations
Michael Bauer, Wesley Wasserburger
Monetary policy surprises—changes in various interest rates around central bank communication events—reflect new information in monetary policy actions and communications. For the Federal Reserve, surprises around Federal Open Market Committee statements and post-meeting press conferences have, in recent years, often led to meaningful market surprises that capture policy news. Event-study analysis provides new market-based evidence of monetary policy transmission: Hawkish policy surprises lower market-based inflation expectations, while dovish surprises raise them, in line with standard monetary transmission. These effects are especially strong at longer horizons.
