Risk and uncertainty in central bank signals: an analysis of monetary policy committee minutes

Abstract

This paper considers the signalling aspect of monetary policy. We introduce a heuristic framework for the study of signal uncertainty, and use this to analyse the signal uncertainty implicit in the communications of the Bank of England's Monetary Policy Committee (MPC). Our findings suggest that frequencies of key terms expressing signal uncertainty in MPC minutes may either reflect the degree of confidence implicit in MPC deliberations, or offer evidence for the presence of an irreducible kind of signal uncertainty that shows up as white noise, casting doubt on the soundness of the various qualitative uncertainty indices found in the literature.