Professor Anna Cieslak explains how central bank communication shapes financial markets, even when rates stay the same

When the Federal Reserve meets, markets obsess over one question: Will interest rates go up or down? But sometimes, market moves happen even when rates don’t change at all. In uncertain times, a subtle shift in tone can ripple across global financial markets.

In this episode of Duke Fuqua Insights Podcast, Professor Anna Cieslak of Duke University’s Fuqua School of Business explores how central bank communication shapes financial conditions beyond formal rate decisions.

Her research examines how the Fed uses “policy tilts”—signals about future intentions—to influence investor expectations and long-term interest rates.

Drawing on decades of data—including the late 1990s productivity boom and the post-COVID recovery—her research shows how policy tilts shift investor risk perceptions and long-term Treasury yields, with effects that can rival formal rate decisions.

She explains that the Fed follows a “risk management approach,” assessing not just the most likely forecast but also low-probability, high-cost scenarios. By signaling vigilance, policymakers reduce fears that they will fall behind inflation.

The stakes of getting communication right are high. In 2021, the Fed's 'lower for longer' messaging diverged from rising inflation concerns, tightening financial conditions even as rates held steady. As former Fed Chair Ben Bernanke observed, monetary policy is '98% talk and 2% action'—which means parsing Fed language is as important as watching the rate decision itself.

Duke Fuqua Insights features digestible conversations with our faculty about the most impactful research from their careers, including studies they teach in Fuqua classes. New episodes every other week in season.

For more from Duke Fuqua, visit us on LinkedIn, Instagram, Facebook, Bluesky, and the Duke Fuqua Insights newsletter.