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The Effects of the Federal Reserve Chair’s Testimony on Treasury Interest Rates

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  • Matthew V. Gordon
  • Kurt Graden Lunsford

Abstract

Communication by the Federal Reserve is important for the conduct of monetary policy. We study how one form of Federal Reserve communication, the congressional testimony by the Chair of the Board of Governors (the Fed Chair), affects interest rates on 2-year and 10-year Treasury Notes. We study three types of Fed Chair testimony: the first day of Monetary Policy Report testimony, the second day of Monetary Policy Report testimony, and testimonies not associated with the Monetary Policy Report but that still relate to monetary policy. We find that the average size of interest rate changes is largest around first-day Monetary Policy Report testimonies and smallest around second-day Monetary Policy Report testimonies. We also document that the sizes of interest rate changes can vary over time and often correspond to the level of the federal funds rate.

Suggested Citation

  • Matthew V. Gordon & Kurt Graden Lunsford, 2024. "The Effects of the Federal Reserve Chair’s Testimony on Treasury Interest Rates," Economic Commentary, Federal Reserve Bank of Cleveland, vol. 2024(01), pages 1-7, January.
    • Handle: RePEc:fip:fedcec:97603
    DOI: 10.26509/frbc-ec-202401
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    References listed on IDEAS

    as
    1. Kurt G. Lunsford, 2020. "Policy Language and Information Effects in the Early Days of Federal Reserve Forward Guidance," American Economic Review, American Economic Association, vol. 110(9), pages 2899-2934, September.
    2. Refet S Gürkaynak & Brian Sack & Eric Swanson, 2005. "Do Actions Speak Louder Than Words? The Response of Asset Prices to Monetary Policy Actions and Statements," International Journal of Central Banking, International Journal of Central Banking, vol. 1(1), May.
    3. Eric T. Swanson & John C. Williams, 2014. "Measuring the Effect of the Zero Lower Bound on Medium- and Longer-Term Interest Rates," American Economic Review, American Economic Association, vol. 104(10), pages 3154-3185, October.
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