[Seminaire CREM] Présentation de Sylverie HERBERT, Banque de France - Faculté Des Sciences Economiques

Abstract:
This paper investigates when monetary policy announcements matter for asset prices. We identify a fundamental heterogeneity in FOMC statements based on the underlying nature of information conveyed about future policy. Using a novel classification, we identify meetings that convey substantial information about uncertainty surrounding future policy as opposed to directional guidance. These statements -- one-third of the total -- drive most, if not all, of monetary policy effects on long-term interest rates, through term premium adjustments rather than expected short-term rates. Our classification resolves why policy announcements explain little variance in long-term rates despite driving their dynamics over time.

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