When the Fed Speaks, What Do the Markets Hear? 

From William McChesney Martin's "punch bowl" to Alan Greenspan's "irrational exuberance," Federal Reserve communication has a history of grabbing attention. It's not always clear, however, whether that attention has real impact on the economy. A recent Federal Reserve Bank of St. Louis Review article by Kevin L. Kliesen, Brian Levine, and Christopher J. Waller analyzes the impact of Fed public statements and information releases to show how Fed communication affects key financial market variables. 

The authors found that Fed communication is associated with changes in the prices of financial market instruments such as Treasury securities and equity prices—but that the effect varies according to the type of communication and who's communicating.

Read the full article here.