One Fed, Many Voices: Coordinated Communication vs. Transparent Debate

Milena Djourelova, Filippo Ferroni, Leonardo Melosi and Alessandro Villa

No 20636, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We study how observed coordination in central bank communication affects monetary policy transmission. We assess the alignment of 481 speeches by FOMC members since 2007 with post-meeting communication using a text-similarity measure (cosine similarity). To identify policy shocks, we use high-frequency changes in eurodollar futures around each speech. On average, these monetary policy speech surprises have no significant effects on inflation expectations or equity prices. However, speech surprises more closely aligned with prior FOMC communications strengthen monetary policy transmission, while those reflecting visible disagreement significantly weaken it. A general equilibrium model with incomplete information rationalizes these findings.

Date: 2025-09
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Working Paper: One Fed, Many Voices: Coordinated Communication vs. Transparent Debate (2025)
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