Monetary policy in the news: communication pass-through and inflation expectations
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Monetary policy in the news: communication pass-through and inflation expectations
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The paper titled "Monetary policy in the news: communication pass-through and inflation expectations," authored by Fiorella De Fiore, Alexis Maurin, Andrej Mijakovic, and Damiano Sandri, investigates the role of media in conveying information about the Federal Reserve's monetary policy to the public. Utilizing large language models (LLMs) for textual analysis, the authors find a strong correspondence between FOMC communication and media coverage, particularly during significant monetary policy shifts. They note that this communication pass-through weakened during the zero lower bound (ZLB) period but improved with the introduction of post-FOMC press conferences, which significantly influence media narratives. The study also reveals that media coverage affects households' inflation expectations, especially in high inflation contexts, highlighting the media's critical function in transmitting central bank communication to the public