The Impact of ECB Monetary Policy Decisions and Communication on the Yield Curve

We use intraday changes in money market rates to construct indicators of news about monetary policy stemming separately from policy decisions and from official communication of the European Central Bank, and study their impact on the yield curve. We show that communication may lead to substantial revisions in expectations of monetary policy and, at the same time, exert a significant impact on interest rates at longer maturities. Thereby, the maturity response pattern to communication is hump-shaped, whereas that to policy decisions is downward-sloping. (JEL: E43, E58) (c) 2010 by the European Economic Association.