Board of Governors of the Federal Reserve System

Figure 1: Press Conference Word Count

Figure 2: Flesch-Kincaid Grade Level Readability of FOMC Communications

Figure 3. Word Cloud Representation of the April 2011 and April 2021 Press Conferences

Panel a: April 27, 2011
This panel provides a word cloud representation of the questions and answers during the April 27, 2011, post-FOMC press conference. The word cloud is shaped as a square. The font size of a word in the cloud is directly proportional to how often a word is used during the Q&A, with the word with the largest font size being the most frequent. The most frequently-used words in this press conference are "Inflation" and "economy," with close behind "recovery," "dollar," "fed," "policy," "see," and "time."

Panel b: April 28, 2021
This panel provides a word cloud representation of the questions and answers during the April 28, 2021, post-FOMC press conference. The word cloud is shaped as a square. The font size of a word in the cloud is directly proportional to how often a word is used during the Q&A, which the word with the largest font size being the most frequent. The most frequently-used words in this press conference are "time" and "people," with close behind "inflation", "go."

Figure 4. Topic Word Clouds for FOMC Press Conferences

Panel a: Topic 5: Mandate/Monetary Policy
This panel provides a word cloud representation of Topic 5 that was identified by the LDA procedure in Chairs' answers across all press conferences between 2011 and 2021. This topic can be identified as a topic about the Fed's "mandate" or "monetary policy." The word cloud is shaped as a square. The font size of a word in the cloud is directly proportional to how often a word is used during the Q&A, which the word with the largest font size being the most frequent. The most frequently-used words in this press conference are "Inflation" and "rate," with close behind "policy," "economy," "percent."

Panel b: Topic 2: Banking Regulation
This panel provides a word cloud representation of Topic 2 that was identified by the LDA procedure in Chairs' answers across all press conferences between 2011 and 2021. This topic can be identified as a topic about "banking regulation." The word cloud is shaped as a square. The font size of a word in the cloud is directly proportional to how often a word is used during the Q&A, which the word with the largest font size being the most frequent. The most frequently-used words in this press conference are "leverage," "fund" and "stress test," with close behind "exposure," "big fail," and "financial institution."

Panel c: Topic 1: Inflation
This panel provides a word cloud representation of Topic 1 that was identified by the LDA procedure in Chairs' answers across all press conferences between 2011 and 2021. This topic can be identified as a topic about "inflation." The word cloud is shaped as a square. The font size of a word in the cloud is directly proportional to how often a word is used during the Q&A, with the word with the largest font size being the most frequent. The most frequently-used words in this press conference are "CPI" and "forget."

Panel d: Topic 7: Independence
This panel provides a word cloud representation of Topic 7 that was identified by the LDA procedure in Chairs' answers across all press conferences between 2011 and 2021. This topic can be identified as a topic about the Fed's "independence". The word cloud is shaped as a square. The font size of a word in the cloud is directly proportional to how often a word is used during the Q&A, which the word with the largest font size being the most frequent. The most frequently-used words in this press conference are "political" and "independence," with close behind "politic," "gap," and "reassessment."

Figure 5: Evolution of Press Conference Q&A Topics

Figure 6. Market Reaction to the March 19, 2014, Press Conference

This figure shows how financial market prices react to the announcement of the FOMC communications on March 19, 2014. Results are shown for nine asset prices: (1) the 2-quarter ahead eurodollar futures rate, (2) the 4-quarter ahead eurodollar futures rate, (3) the 2-year Treasury yield, (4) the 5-year Treasury yield, (5) the 10-year Treasury yield, (6) the 5-year TIPS yield, (7) the S&P 500 Index, (8) the VIX, and (9) the euro/dollar exchange rate.

Top-left panel
This panel shows the evolution of the implied 2-quarter ahead eurodollar futures rate on March 19, 2014, between noon and 6pm. The FOMC statement is released at 2pm (indicated by a vertical line), the FOMC press conference start at 2:30pm which consists of first the opening statement at the press conference (shaded in green in the picture) and the Q&A segment of the press conference (shaded in yellow in the picture). The 2-quarter eurodollar rate starts at around 0.28, jumps up to 0.29 following the release of the FOMC statement, then fluctuates a bit during the press conference before ending the day at 0.285.

Middle-left panel
This panel shows the evolution of the implied 4-quarter ahead eurodollar futures rate on March 19, 2014, between noon and 6pm. The FOMC statement is released at 2pm (indicated by a vertical line), the FOMC press conference start at 2:30pm which consists of first the opening statement at the press conference (shaded in green in the picture) and the Q&A segment of the press conference (shaded in yellow in the picture). The 4-quarter eurodollar rate starts at around 0.42, jumps up to 0.46 following the release of the FOMC statement, then rises further to about 0.49 during the press conference before ending the day at 0.47.

Bottom-left panel
This panel shows the evolution of the 2-year Treasury yield on March 19, 2014, between noon and 6pm. The FOMC statement is released at 2pm (indicated by a vertical line), the FOMC press conference start at 2:30pm which consists of first the opening statement at the press conference (shaded in green in the picture) and the Q&A segment of the press conference (shaded in yellow in the picture). The 2-year Treasury yield starts at around 0.35, jumps up to 0.41 following the release of the FOMC statement, then rises further to about 0.44 during the press conference before ending the day at 0.42.

Top-middle panel
This panel shows the evolution of the 5-year Treasury yield on March 19, 2014, between noon and 6pm. The FOMC statement is released at 2pm (indicated by a vertical line), the FOMC press conference start at 2:30pm which consists of first the opening statement at the press conference (shaded in green in the picture) and the Q&A segment of the press conference (shaded in yellow in the picture). The 5-year Treasury yield starts at around 1.575, jumps up to 1.65 following the release of the FOMC statement, then rises further to about 1.73 during the press conference before ending the day at 1.71.

Middle-middle panel
This panel shows the evolution of the 10-year Treasury yield on March 19, 2014, between noon and 6pm. The FOMC statement is released at 2pm (indicated by a vertical line), the FOMC press conference start at 2:30pm which consists of first the opening statement at the press conference (shaded in green in the picture) and the Q&A segment of the press conference (shaded in yellow in the picture). The 10-year Treasury yield starts at around 2.71, jumps up to 2.75 following the release of the FOMC statement, then rises further to about 2.78 during the press conference before ending the day at 2.77.

Bottom-middle panel
This panel shows the evolution of the 5-year TIPS yield on March 19, 2014, between noon and 6pm. The FOMC statement is released at 2pm (indicated by a vertical line), the FOMC press conference start at 2:30pm which consists of first the opening statement at the press conference (shaded in green in the picture) and the Q&A segment of the press conference (shaded in yellow in the picture). The 5-year TIPS yield starts at around -0.675, jumps up to -0.575 following the release of the FOMC statement, then rises further to about -0.500 during the press conference before ending the day at around -0.51.

Top-right panel
This panel shows the evolution of the level of the S&P 500 Index on March 19, 2014, between noon and 6pm. The FOMC statement is released at 2pm (indicated by a vertical line), the FOMC press conference start at 2:30pm which consists of first the opening statement at the press conference (shaded in green in the picture) and the Q&A segment of the press conference (shaded in yellow in the picture). The S&P 500 Index starts at around 1872, falls to 1866 following the release of the FOMC statement, then falls further to about 1856 during the press conference before ending the day at 1861.

Middle-right panel
This panel shows the evolution of the level of the VIX on March 19, 2014, between noon and 6pm. The FOMC statement is released at 2pm (indicated by a vertical line), the FOMC press conference start at 2:30pm which consists of first the opening statement at the press conference (shaded in green in the picture) and the Q&A segment of the press conference (shaded in yellow in the picture). The VIX index starts at around 14.2, is little changed following the release of the FOMC statement, then jumps up to about 15.5 during the press conference before ending the day at around 15.

Bottom-right panel
This panel shows the evolution of the level of the euro-dollar exchange rate on March 19, 2014, between noon and 6pm. The FOMC statement is released at 2pm (indicated by a vertical line), the FOMC press conference start at 2:30pm which consists of first the opening statement at the press conference (shaded in green in the picture) and the Q&A segment of the press conference (shaded in yellow in the picture). The euro/dollar exchange rate starts at around 0.718, jumps up to 0.722 following the release of the FOMC statement, then rises further to about 0.724 during the press conference before ending the day at around 0.723.

Figure 7. Market Reaction to the December 17, 2014, Press Conference

This figure shows how financial market prices react to the announcement of the FOMC communications on December 17, 2014. Results are shown for nine asset prices: (1) the 2-quarter ahead eurodollar futures rate, (2) the 4-quarter ahead eurodollar futures rate, (3) the 2-year Treasury yield, (4) the 5-year Treasury yield, (5) the 10-year Treasury yield, (6) the 5-year TIPS yield, (7) the S&P 500 Index, (8) the VIX, and (9) the euro/dollar exchange rate.

Top-left panel
This panel shows the evolution of the implied 2-quarter ahead eurodollar futures rate on December 17, 2014, between noon and 6pm. The FOMC statement is released at 2pm (indicated by a vertical line), the FOMC press conference start at 2:30pm which consists of first the opening statement at the press conference (shaded in green in the picture) and the Q&A segment of the press conference (shaded in yellow in the picture). The 2-quarter eurodollar rate starts at around 0.415, jumps down to 0.37 following the release of the FOMC statement, then jumps back up to 0.43 during the press conference before ending the day at 0.425.

Middle-left panel
This panel shows the evolution of the implied 4-quarter ahead eurodollar futures rate on December 17, 2014, between noon and 6pm. The FOMC statement is released at 2pm (indicated by a vertical line), the FOMC press conference start at 2:30pm which consists of first the opening statement at the press conference (shaded in green in the picture) and the Q&A segment of the press conference (shaded in yellow in the picture). The 4-quarter eurodollar rate starts at around 0.84, jumps down to 0.74 following the release of the FOMC statement, then jumps back up to about 0.87 during the press conference before ending the day at 0.87.

Bottom-left panel
This panel shows the evolution of the 2-year Treasury yield on December 17, 2014, between noon and 6pm. The FOMC statement is released at 2pm (indicated by a vertical line), the FOMC press conference start at 2:30pm which consists of first the opening statement at the press conference (shaded in green in the picture) and the Q&A segment of the press conference (shaded in yellow in the picture). The 2-year Treasury yield starts at around 0.59, jumps down to 0.52 following the release of the FOMC statement, then jumps back up to about 0.60 during the press conference before ending the day at 0.62.

Top-middle panel
This panel shows the evolution of the 5-year Treasury yield on December 17, 2014, between noon and 6pm. The FOMC statement is released at 2pm (indicated by a vertical line), the FOMC press conference start at 2:30pm which consists of first the opening statement at the press conference (shaded in green in the picture) and the Q&A segment of the press conference (shaded in yellow in the picture). The 5-year Treasury yield starts at around 1.57, jumps down to 1.50 following the release of the FOMC statement, then jumps back up to about 1.61 during the press conference before ending the day at 1.61.

Middle-middle panel
This panel shows the evolution of the 10-year Treasury yield on December 17, 2014, between noon and 6pm. The FOMC statement is released at 2pm (indicated by a vertical line), the FOMC press conference start at 2:30pm which consists of first the opening statement at the press conference (shaded in green in the picture) and the Q&A segment of the press conference (shaded in yellow in the picture). The 10-year Treasury yield starts at around 2.10, fluctuates between 2.13 and 2.08 following the release of the FOMC statement, then jumps back up to about 2.15 during the press conference before ending the day at 2.135.

Bottom-middle panel
This panel shows the evolution of the 5-year TIPS yield on December 17, 2014, between noon and 6pm. The FOMC statement is released at 2pm (indicated by a vertical line), the FOMC press conference start at 2:30pm which consists of first the opening statement at the press conference (shaded in green in the picture) and the Q&A segment of the press conference (shaded in yellow in the picture). The 5-year TIPS yield starts at around 0.28, jumps down to 0.22 following the release of the FOMC statement, then jumps back up to about 0.34 during the press conference before ending the day at 0.35.

Top-right panel
This panel shows the evolution of the level of the S&P 500 Index on December 17, 2014, between noon and 6pm. The FOMC statement is released at 2pm (indicated by a vertical line), the FOMC press conference start at 2:30pm which consists of first the opening statement at the press conference (shaded in green in the picture) and the Q&A segment of the press conference (shaded in yellow in the picture). The S&P 500 Index level starts at around 1995, jumps up to 1998 following the release of the FOMC statement, then jumps back down to about 1995 during the middle of the press conference, rises to 2010 at the end of the press conference before ending the day at 2012.

Middle-right panel
This panel shows the evolution of the level of the VIX on December 17, 2014, between noon and 6pm. The FOMC statement is released at 2pm (indicated by a vertical line), the FOMC press conference start at 2:30pm which consists of first the opening statement at the press conference (shaded in green in the picture) and the Q&A segment of the press conference (shaded in yellow in the picture). TheVIX index starts at around 21.5, jumps down to 20 following the release of the FOMC statement, then jumps back up to about 21.5 through the middle of the press conference, falls back down to 20 towards the end of the press conference before ending the day at about 19.5.

Bottom-right panel
This panel shows the evolution of the level of the euro-dollar exchange rate on December 17, 2014, between noon and 6pm. The FOMC statement is released at 2pm (indicated by a vertical line), the FOMC press conference start at 2:30pm which consists of first the opening statement at the press conference (shaded in green in the picture) and the Q&A segment of the press conference (shaded in yellow in the picture). The euro/dollar exchange rate starts at around 0.806, jumps down to 0.803 following the release of the FOMC statement, then jumps back up to about 0.811 during the press conference before ending the day at around 0.811.

Figure 8: Event-Window Reaction to the Statement and Post-meeting Press Conference