Speeches by the Fed Chair Are More Important Than FOMC Announcements: An Improved High-Frequency Measure of U.S. Monetary Policy Shocks

Résumé

We extend the high-frequency monetary policy shock measures of Kuttner (2001) and Gürkaynak, Sack, and Swanson (2005a) to other major types of Fed communication beyond FOMC announcements, including post-FOMC-meeting press conferences, speeches and Congressional testimony by the Fed Chair and Vice Chair, and FOMC meeting minutes releases, all from 1988 to 2023. We find that speeches and press conferences by the Fed Chair are more important than FOMC announcements for stock prices, Treasury yields, and all but the shortest maturity interest rate futures. Thus, previous studies’ focus on FOMC announcements has generally missed the most important source of variation in U.S. monetary policy. We identify federal funds rate, forward guidance, and LSAP components for each of these announcement types and show that their effects are consistent across types. We illustrate the benefits of our expanded set of monetary policy announcements with an application to a monetary policy VAR.

Codes JEL