Central bank communication through interest rate projections

In this paper we quantitatively investigate how central bank communication affects the market yield curve on announcement days. We do this for two central banks who communicate future policy intentions by means of publishing the path of expected future policy rates. We find that unanticipated changes in the published policy rates correspond to yield changes in the same direction. However, policy revisions cannot explain all variation in market rates on announcement days. We further shed some light on which sources of disagreement could explain these differences.