Speaking of Inflation: The Influence of Fed Speeches on Expectations

Eleonora Granziera, Vegard H. Larsen, Greta Meggiorini and Leonardo Melosi

No 11992, CESifo Working Paper Series from CESifo

Abstract: We examine how speeches by Federal Open Market Committee (FOMC) members, including regional Fed presidents, shape private sector expectations. Speeches that signal rising inflationary pressures prompt both households and professional forecasters to raise their inflation expectations, consistent with Delphic effects. Only professional forecasters respond to Odyssean communications—statements about the Fed’s intended policy response—leaving Delphic effects as the dominant channel for households. These household responses are driven by speeches from regional presidents, likely due to greater visibility in regional media coverage. A general equilibrium model, featuring agents who differ in their ability to interpret Odyssean signals, explains this heterogeneity.

Keywords: central bank communication; Delphic; Odyssean; inflation expectations; textual analysis; expectation formation (search for similar items in EconPapers)
JEL-codes: D83 E31 E58 (search for similar items in EconPapers)
Date: 2025
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