Abstract
Central bank communication is an increasingly important policy tool, but its impact on market expectations arises through many potential channels. We clarify how communicating solely about expected future economic conditions can move short- and long-run market rates, and use the publication of the Bank of England’s Inflation Report to study the market impact of such communication. We find compelling evidence for a long-run information effect driven more by narrative than by quantitative forecasts. The effect operates largely via its impact on the term premium. We conclude that central banks can impact long-run interest rates without making explicit future policy commitments.

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