 Central bank communication of uncertaintyPietro Fadda, Rayane Hanifi, Klodiana Istrefi and Adrian Penalver Journal of International Money and Finance, 2025, vol. 157, issue C Abstract: In this paper we examine how central bankers communicate confidence and uncertainty in their narrative about the state of the economy when deciding policy, and how this communication relates to their policy decisions. We use text analysis techniques to construct forward and backward looking sentiment measures of policymakers’ confirmation and surprise from the published Minutes of the Federal Reserve, the Bank of England and the European Central Bank. We show that the communication of confirmation and surprise has statistical power to explain monetary policy decisions, and that both types of communication convey signals. Our results suggest that policymakers signal a higher likelihood of policy inaction and easing when communicating higher uncertainty and surprise, and a lower likelihood of easing when confirming trends. The latter is explained by the intensity of the inflation topic in confirmation quotes, whereby a higher confirmation with regard to inflation indicates a higher confidence of policymakers to tighten policy. Keywords: Central banks; Monetary policy; Communication; Minutes; Uncertainty (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:157:y:2025:i:c:s0261560625001202 DOI: 10.1016/j.jimonfin.2025.103385 Access Statistics for this article Journal of International Money and Finance is currently edited by J. R. Lothian More articles in Journal of International Money and Finance from Elsevier |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.