Working Paper: NBER ID: w31232
Authors: Carola Binder; Pei Kuang; Li Tang
Abstract: We study how US consumers’ house price expectations respond to verbal and non-verbal communication about interest rate changes using several large online surveys. Verbal communication about interest rate hikes leads to little response of average house price expectations but large heterogeneity among household groups. Communication about rate hikes combined with a simple explanation of the mortgage rate channel causes large downward revisions to house price expectations. Consumers interpret heterogeneously Chair Powell’s voice tone and body language at the press conference which significantly influence their house price expectations. More negative evaluations are associated with larger upward revisions to house price expectations.
Keywords: central bank communication; house price expectations; monetary policy; consumer expectations
JEL Codes: E30; E31; E52; E7
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Central bank communication about interest rate hikes (E52) | House price expectations (R31) |
| Communication about rate hikes + explanation of mortgage rate channel (E43) | Downward revisions in house price expectations (R21) |
| Nonverbal communication (tone and body language) (L96) | Consumer expectations (D12) |
| Understanding the mechanism (mortgage rate channel) (E43) | Expectation adjustments (D84) |