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Are households indifferent to monetary policy announcements?

Fiorella De Fiore (), Marco Lombardi () and Johannes Schuffels

No 956, BIS Working Papers from Bank for International Settlements

Abstract: We study the impact of the Fed's monetary policy announcements on households' expectations by comparing responses to the Survey of Consumer Expectations before and after Federal Open Market Committee (FOMC) meetings, over the period 2013-2019. We find that Fed decisions affect expectations of interest rates on savings accounts, particularly for respondents with high financial and numerical literacy. The impact of monetary policy announcements on inflation expectations is muted, even in response to some of the most relevant meetings of the FOMC that took place during that period. Expectations of personal financial conditions are barely affected. Our results stand in contrast to experimental studies that find strong effects of monetary policy and other macroeconomic news on expectations of households receiving a specific treatment, suggesting that the news naturally reaching the general population may provide weaker signals.

Keywords: households; monetary policy; central bank communication; inflation expectations; survey data (search for similar items in EconPapers)
JEL-codes: E30 E40 E50 E70 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2021-08
New Economics Papers: this item is included in nep-cba, nep-isf, nep-mac and nep-mon
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