Federal Reserve Bank of Dallas
Do Monetary Policy Announcements Shift Household Expectations?
We use daily survey data from Gallup to assess whether households' beliefs about economic conditions are influenced by surprises in monetary policy announcements. We first provide more general evidence that public confidence in the state of the economy reacts to certain types of macroeconomic news very quickly. Next, we show that surprises to the Federal Funds target rate are among the news that have statistically significant and instantaneous effects on economic confidence. In contrast, surprises about forward guidance and asset purchases do not have similar effects on household beliefs, perhaps because they are less well understood. We document heterogeneity in the responsiveness of sentiment across demographics.
Cite this item
Daniel J. Lewis & Christos Makridis & Karel Mertens, Do Monetary Policy Announcements Shift Household Expectations?, Federal Reserve Bank of Dallas, Working Papers 1906, 05 Sep 2019.
- E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
- E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
- E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
- E70 - Macroeconomics and Monetary Economics - - Macro-Based Behavioral Economics - - - General
Keywords: Monetary policy shocks; central bank communication; information rigidities; consumer confidence; high frequency identification
This item with handle RePEc:fip:feddwp:1906
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