FOMC Communication and Interest Rate Sensitivity to News
44 Pages Posted: 22 Nov 2017
Date Written: 2017-10-01
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
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