Mind the Stance Gap: State-Dependent Filtering in the Federal Reserve Communications

Alev Atak and Kısacıkoğlu, Burçin
Authors registered in the RePEc Author Service: Burçin Kısacıkoğlu

No 21538, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: The Federal Reserve's public statements do not directly reflect the FOMC internal deliberations. The committee filters the message before releasing it, and the filter behaves differently when the policy rate is constrained. We formalize this two-stage filter and take it to data, comparing meeting-level monetary policy stance indices built from FOMC transcripts and post-meeting statements across 128 meetings from message leans somewhat more hawkish than the underlying deliberation, consistent with the Fed protecting its inflation-fighting credibility while conventional policy still has room to operate. At the effective lower bound, the sign flips, and statements turn substantially more dovish than the internal discussion. The reversal is not an artifact of forward guidance and quantitative easing language, and communication takes on a more direct role when the rate instrument is constrained. Using staff economic projections as an intermediate benchmark, we show that the regime-dependent shift stems from deliberation rather than public communication. We also show that the measured stance gap predicts later revisions in the Fed's statements because the FOMC initially communicates with a bias, and the statement gradually catches up to the internal view. Statement-based text measures are not transparent proxies for internal policy preferences, particularly across policy regimes, and Taylor rules estimated from public language overstate the Fed's sensititivity to inflation and unemployment.

Keywords: Central; bank; communication (search for similar items in EconPapers)
JEL-codes: D83 E52 E58 G14 (search for similar items in EconPapers)
Date: 2026-05
New Economics Papers: this item is included in nep-cba and nep-mon
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