Central banks rarely speak with one voice. At the Federal Reserve, for instance, each official brings a distinct perspective, and markets parse every speech for hints of where policy is headed. Different views may help make better decisions, but do they also help when explaining those decisions to the public? And what happens when voices diverge? This column shows that alignment in communication matters: speeches that echo the preceding Chair’s post-FOMC press conference reinforce monetary transmission, while dissonant voices create noise that weakens it.
A large literature shows that how the Federal Reserve speaks matters as much as what it decides (see Bauer and Swanson 2023 for a review). In this column, we present new evidence on Federal Open Market Committee (FOMC) members’ speeches outside the press conference which show how markets react to those remarks. The study highlights both the advantages and the challenges of communication in a committee setting. Coordinated communications are not dismissed as redundant, suggesting that a plurality of voices reinforces the impact of monetary policy communication. Yet only aligned speeches strengthen transmission; dissonant voices create noise that weakens the Fed’s ability to steer inflation expectations.
The key lesson is that many voices can strengthen communication, but only if they are coordinated.
Market impact of FOMC voices
In our recent study (Djourelova et al. 2025), we compile 481 time-stamped speeches by FOMC members since 2007, excluding official press conferences, and pair each event with intraday movements in short-maturity interest-rate futures to construct a high-frequency ‘monetary policy speech’ (MPS) surprise. 1 We study the effects of these surprises on a set of daily macro-financial variables, including short- and long-term interest rates, inflation expectations, and stock prices.
We find that MPS surprises shift the yield curve in the expected direction but leave little trace on inflation expectations or stock prices. A one basis point tightening surprise translates into roughly one basis point increases in one- to five-year yields, with modest persistence and little explanatory power for daily return variation. This finding likely reflects the aggregation of numerous heterogeneous signals conveyed by FOMC members.
To take into account this heterogeneity in speeches, we compute an index to measure text similarity between each speech and the Chair’s most recent post-meeting press conference. This alignment index gives us an interpretable conditioning variable: the more a speech echoes the Chair’s message, the higher its similarity score.
Conditioning MPS-induced revisions on speech similarity reveals a clear pattern: tightening surprises from speeches closely aligned with the Chair’s message prompt a front-loaded rise in short-term yields and a decline in inflation expectations, resembling the transmission of standard monetary policy shocks. By contrast, dissonant tightening surprises cause a more moderate upward shift in the yield curve and move inflation expectations and stock prices in the opposite direction.
Reinforcement versus dissonance in FOMC communication
Figure 1 shows the one-day response of key financial variables to a tightening speech surprise, plotted against similarity to the Chair’s press conference message. Reading each panel from left (low similarity) to right (high similarity) reveals a sharp contrast. At high similarity, the policy signal from the prior FOMC meeting is reinforced: short-term interest rates (three months to one year) rise, inflation expectations fall, and stock prices decline. This highlights an important point: similarity does not imply redundancy. Even speeches closely aligned with the Chair’s post-FOMC communication convey valuable information for market participants.
Figure 1 Response of financial variables to a tightening monetary policy speech surprise across different levels of similarity, measured on day n after the speech
Note: Black circles indicate the unconditional effect of the speech surprise, estimated without interacting with the similarity measure.
Source: Djourelova et al. (2025).
At low similarity, MPS surprises prompt markets to reassess the Fed’s policy stance, shifting the yield curve, though less sharply than when remarks align closely with the Chair’s prior communication. Dissonant speeches, therefore, still affect market rates. Yet as the degree of dissonance with the Chair’s message increases, the responses of inflation expectations and stock prices diminish, turn insignificant, and may even reverse.
In Figure 2 we show the propagation of only the highly aligned tightening MPS surprises. These speeches reinforce the conventional propagation of monetary policy: near-term yields move up and inflation expectations decline. The contrast with the unconditional response (plotted in black) underscores the critical role of content alignment in sharpening transmission. Notably, dropping the Chair’s own speeches barely changes the result, suggesting that markets learn from the broader committee when the message is aligned, not just from the Chair.
Figure 2 Response to a monetary policy speech surprise based on speeches with high textual similarity to the Chair’s post-meeting press conference
Note: We focus on MPS surprises with similarity more than one standard deviation above the sample mean.
Source: Djourelova et al. (2025).
Echoes that move markets: Reinforcing speeches and policy transmission
Taken together, these results underscore the challenge of communicating monetary policy through a committee. Effective expectation management requires coordination: dissonant messages create noise that disrupts the usual transmission of policy signals, while similar speeches reinforce earlier messages, showing they are valued rather than dismissed as redundant.
Why does coordination in communications reinforce the transmission of monetary policy? Several explanations are possible. When a speech reiterates what the Chair has previously communicated, it sharpens the policy signal, enhances understanding, and strengthens the credibility of the original message. A speech echoing the earlier Chair’s message may also convey that the policy stance announced by the FOMC enjoys broad support within the Committee.
In contrast, dissonant speeches may signal that consensus around the post-meeting policy stance is weakening or rests on only narrow support within the Committee. Our analysis shows that such speeches follow a distinct transmission channel. Whether the dissonance reflects an effort to pre-emptively signal a policy shift ahead of the next FOMC meeting or simply conveys an individual view that markets deem influential for the expected policy path, the resulting MPS surprise fails to generate the intended effects. Following a dissonant tightening surprise, inflation expectations rise and stock prices increase, reflecting stronger near-term growth prospects. This evidence indicates that changes in the policy stance are best communicated at the conclusion of the FOMC meeting, rather than delegated to individual members.
Divergence from earlier FOMC messages may also lead markets to conclude that new information has emerged since the last meeting, prompting a reassessment of the outlook. In such cases, dissonant speeches can trigger Delphic effects, shifting expectations in the opposite direction from earlier communications. For example, if a policymaker unexpectedly adopts a more hawkish tone, markets may interpret this as a sign that the FOMC is increasingly concerned about overheating, which could raise inflation expectations and trigger a bullish reaction in equity markets.
In our ancillary research paper, we rationalise these findings with an imperfect information model in which policymakers’ communication is noisy.
Conclusions
Our analysis underscores some of the key challenges that arise in central bank communication within a committee framework. We show that coordinated communication is not dismissed as redundant but instead strengthens monetary transmission, while dissonant voices create noise that weakens the central bank’s ability to steer inflation expectations and stabilize the economy. The key lesson is that multiple voices can strengthen communication, provided they are coordinated to some degree.
Source : VOXeu
