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Narratives and the Term Structure of Inflation Expectations

Author

Listed:
  • Jonathan Benchimol
  • Sathya Mellina

Abstract

We examine how inflation language in FOMC statements and Chair press conferences maps into the breakeven inflation (BEI) term structure from two to ten years. Five indices capture stance, broad and current inflation language, and the Delphic/Odyssean decomposition. Conditional on the high-frequency rate surprise, statement language is associated with lower BEI at short-to-intermediate maturities, consistent with markets reading committee-vetted text through the policy reaction function. Press conferences differ: Delphic language loads positively on long-horizon forwards; Odyssean language compresses the short-to-intermediate segment. Intraday BEI moves positively with every press-conference index; no analogous statement-window effect survives partialling out the rate surprise.

Suggested Citation

  • Jonathan Benchimol & Sathya Mellina, 2026. "Narratives and the Term Structure of Inflation Expectations," CAMA Working Papers 2026-29, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    • Handle: RePEc:een:camaaa:2026-29
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    File URL: https://crawford.anu.edu.au/sites/default/files/2026-05/29_2026_Benchimol_Mellina_0.pdf
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    JEL classification:

    • C45 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Neural Networks and Related Topics
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • 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
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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