FOMC Communication and Interest Rate Sensitivity to News

44 Pages Posted: 22 Nov 2017

See all articles by Jenny Tang

Jenny Tang

Federal Reserve Banks - Federal Reserve Bank of Boston

Date Written: 2017-10-01

Abstract

In this paper, I examine whether communications by the Federal Open Market Committee (FOMC) play a role in determining the types of macroeconomic news that financial markets pay attention to. To do so, I construct novel measures of the intensity with which FOMC statements and meeting minutes discussed labor relative to other topics. I find that these labor topic intensity measures are related to the amount by which interest rates’ response to labor-related news exceeds their response to all other news. This relationship is especially strong for interest rates of longer maturities and is also present for short-term interest rate expectations over various horizons.

Keywords: Federal Reserve, FOMC, central bank communication, interest rates

JEL Classification: E43, E52, E58, G12

Suggested Citation

Tang, Jenny, FOMC Communication and Interest Rate Sensitivity to News (2017-10-01). FRB of Boston Working Paper No. 17-12. Available at SSRN: https://ssrn.com/abstract=3075842

Jenny Tang (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Boston ( email )

600 Atlantic Avenue
Boston, MA 02210
United States

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