Shaping Expectations and Coordinating Attention: The Unintended Consequences of FOMC Press Conferences

In an effort to increase transparency, the Chair of the Federal Reserve now holds a press conference following some, but not all, Federal Open Market Committee announcements. Press conferences are scheduled independently of economic conditions and communicate little additional information relative to the announcements. Using media coverage and Google searches, we show that investors shift attention away from announcements without press conferences. This inattention hinders the Fed's attempts to coordinate market expectations and therefore prevents effective monetary policy. Consequently, evidence from equity and derivative markets demonstrates that investors lower their expectations of major policy actions on days without press conferences.