Why do FOMC minutes move markets three weeks after the policy decision?
Abstract
Federal Open Market Committee (FOMC) minutes remain a relevant source of information even though they are released roughly three weeks after the policy decision. We use text embeddings to identify what they add to decision-day communication and whether that content comes from staff analysis or committee deliberation. Greater semantic novelty in the minutes is associated with larger market reactions, while staff versus decision-makers’ views contained in the minutes are informative about the direction of market reactions. Methodologically, we develop an easy-to-implement method to identify the market-moving content in central bank documents.
Keywords
Artificial intelligence; central bank communication; high-frequency event study; FOMC minutes; textual novelty