West Cleveland News

A report from the Federal Reserve Bank of Cleveland reveals that U.S. Treasury Note interest rates experience significant fluctuations when the chair of the Federal Reserve’s Board of Governors testifies before Congress. The average change recorded is 4.7 basis points shortly after the first day of testimony, based on data collected from July 1991 to June 2023.

According to a press release from the Federal Reserve Bank of Cleveland, authors Matthew Gordon and Kurt Lunsford said, "Our findings of significant responses of interest rates around Fed Chair testimony suggest that financial markets, and perhaps the broader public, obtain relevant information on future policy and the economy through this communication vehicle."

As stated in the Economic Commentary, their study on Federal Reserve communication - specifically Fed Chair testimony before Congress - uncovers distinct patterns among three types of testimony: first-day Monetary Policy Report testimonies, second-day Monetary Policy Report testimonies, and non-Monetary Policy Report testimonies. Gordon and Lunsford observed variations in the average size of interest rate changes with the largest shifts occurring around first-day testimonies and the smallest for second-day testimonies.

The study further notes that these interest rate changes correlate with the level of federal funds rate and have varied over time. It particularly highlights smaller changes in two-year Treasury rates during certain periods such as 2009 through 2014 and 2020 through 2021. Conversely, larger changes were recorded in 2022 and 2023 as interest rates increased.