Matthew V. Gordon

We study how congressional testimony about monetary policy by the Chair of the Board of Governors of the Federal Reserve System affects interest rates and stock prices. First, we study testimony associated with the Federal Reserve’s Monetary Policy Reports (MPRs) to Congress. Testimony for a particular MPR is usually given on two days, one day for each chamber of Congress. We separately study the first day and second day of MPR testimony. We also study testimonies not associated with MPRs but that are still related to monetary policy. We find that first-day MPR testimonies cause the largest movements in interest rates and generate negative co-movement between interest rates and stock prices. Testimonies not associated with MPRs have similar but weaker effects. Second-day MPR testimonies cause the smallest movements in interest rates and generate no co-movement between interest rates and stock prices.

Models used in this article find that aggregate demand and supply factors such as supply chain disruptions have contributed significantly to recent high inflation.

Economists have pointed to multiple potential drivers of the recent high-inflation environment, and supply chain issues stand out among them.