In this work we analyse the effect of news relating to the expected path of monetary policy on interest rate futures. Central banks' transparency is in most respects much greater than it was a decade ago, and so central bank communication needs to be included as a potential source of news. We estimate the effect of central bank communication on daily interest rate futures for a panel of six economies. As macroeconomic news explain a much larger share of daily changes in interest rate expectations than actions of the central bank, we also control for domestic and international macroeconomic news and monetary policy surprises. We find that the commentary accompanying rate decisions and monetary policy reports are the channels of communication that most influence expectations.

Marion Kohler is an economist at the Reserve Bank of Australia, where she has worked as a Senior Research Manager and in her current role as Head of the Prices, Wages and Labour Market section. Her research interests cover a number of topics in monetary economics and international macroeconomics; her current research focuses on building inflation forecasting models and analysing the effective communication of monetary policy. Prior to joining the Reserve Bank in 2001, Marion spent several years at the Bank of England where she worked in different sections within the Monetary Analysis area. Marion holds a PhD in Economics from the European University Institute, Florence.

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