Measuring Central Bank Communication:

We present a new automated, objective and intuitive scoring method to measure the content of central bank communication about future policy rate moves. We apply the methodology to statements released by the Federal Open Market Commitee (FOMC) after monetary policy meetings. Using high-frequency financial data, we find that yields on short-term risk-free nominal rates respond both to changes in policy rates and the content of the statements, whereas, medium and long-term rates only respond to changes in communication. Using lower frequency data, we find that changes in the statements lead policy rate moves by about six months both in univariate and vector autoregression models. The paper discusses the interplay between policy communication and rate moves.