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Central Bank Communication with the Polarized Public

Author

Listed:
  • Pei Kuang
  • Michael Weber
  • Shihan Xie

Abstract

This paper examines the impact of political polarization on public trust in the Fed and its influence on macroeconomic expectations. Using a large-scale survey experiment which we fielded on President Trump's 2025 inauguration day, we study how households form beliefs about the Fed regarding its political leaning, independence, and trustworthiness. Political alignment significantly shapes perceptions: individuals who view the Fed as politically aligned report higher independence of and trust in the Fed, leading to lower inflation expectations and uncertainty. Strategic communication on institutional structure and policy objectives effectively mitigates perception biases, reinforcing the Fed’s credibility and enhancing its policy effectiveness.

Suggested Citation

  • Pei Kuang & Michael Weber & Shihan Xie, 2025. "Central Bank Communication with the Polarized Public," NBER Working Papers 33524, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:33524
    Note: AP ME
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    Cited by:

    1. Fiorella De Fiore & Damiano Sandri & James Yetman, 2025. "Household perceptions and expectations in the wake of the inflation surge: survey evidence," BIS Bulletins 104, Bank for International Settlements.
    2. Goodhart, C. A. E. & Hoang Vu, Ly, 2025. "When do people trust their government?," LSE Research Online Documents on Economics 127880, London School of Economics and Political Science, LSE Library.
    3. Kuang, Pei & Luca, Davide & Wei, Zhiwu, 2025. "Ballots, Budgets and Bricks: Brexit and the Polarisation of Individual Economic Behaviours," MPRA Paper 125104, University Library of Munich, Germany.

    More about this item

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • E70 - Macroeconomics and Monetary Economics - - Macro-Based Behavioral Economics - - - General

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