Matteo Leombroni, Andrea Vedolin, Gyuri Venter, Paul Whelan, 18 October 2018

It has been argued that central bank announcements can simultaneously convey both optimism and pessimism. This column explores the issue by looking at the effects of ECB communications on euro area bond yields. It finds direct evidence that monetary policy not only affects long-term rates through expectations of future short-term rates, but also by influencing the risk premia investors need in order to hold long-term bonds. 

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