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Messaging to a public with its own view on central bank confidence

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  • Gáti, Laura
  • Handlan, Amy

Abstract

We model central bank communication when there is disagreement between the markets and the central bank about the central bank’s confidence surrounding its point forecast. We show that such a disagreement leads the markets to misunderstand a given announcement, so that the markets either over- or underreact to the bank’s announcement. Communicating only a part of the central bank’s information set is a way to correct the markets’ over- or underreaction. The model also produces predictions for how the central bank’s statement drafting process can take the disagreement about uncertainty into account, which we find support for in data on Federal Reserve System communication. JEL Classification: E52, E58, C49

Suggested Citation

  • Gáti, Laura & Handlan, Amy, 2026. "Messaging to a public with its own view on central bank confidence," Research Bulletin, European Central Bank, vol. 142.
    • Handle: RePEc:ecb:ecbrbu:2026:0142:
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    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • C49 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Other

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