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The financial market effect of FOMC minutes

Author

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  • Carlo Rosa

Abstract

The influence of the Federal Reserve?s unanticipated target rate decisions on U.S. asset prices has been the subject of numerous studies. More recently, researchers have looked at the asset price response to statements issued by the Federal Open Market Committee (FOMC). Yet, despite a vast and growing body of evidence on the financial market effect of monetary news released on FOMC meeting days, little is known about the real-time response of U.S. asset prices to the information contained in central bank minutes. This article fills the gap by using a novel, high-frequency data set to examine the effect of the FOMC minutes release on U.S. asset prices?Treasury rates, stock prices, and U.S. dollar exchange rates. The author shows that the release significantly affects the volatility of U.S. asset prices and their trading volume. The magnitude of the effects is economically and statistically significant, and it is similar in magnitude to the Institute for Supply Management manufacturing index release, although smaller than that of the FOMC statement and nonfarm payrolls releases. The asset price response to the minutes, however, has declined in recent years, suggesting that the FOMC has become more transparent by releasing information in a timelier manner.

Suggested Citation

  • Carlo Rosa, 2013. "The financial market effect of FOMC minutes," Economic Policy Review, Federal Reserve Bank of New York, issue Dec, pages 67-81.
    • Handle: RePEc:fip:fednep:00004
    as

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    References listed on IDEAS

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    More about this item

    Keywords

    high-frequency asset prices; monetary policy; FOMC minutes;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics

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