Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/314747 
Year of Publication: 
2025
Series/Report no.: 
CESifo Working Paper No. 11708
Publisher: 
CESifo GmbH, Munich
Abstract: 
This paper examines the impact of political polarization on public trust in the Fed and its influence on macroeconomic expectations. Using a large-scale survey experiment which we fielded on President Trump's 2025 inauguration day, we study how households form beliefs about the Fed regarding its political leaning, independence, and trustworthiness. Political alignment significantly shapes perceptions: individuals who view the Fed as politically aligned report higher independence of and trust in the Fed, leading to lower inflation expectations and uncertainty. Strategic communication on institutional structure and policy objectives effectively mitigates perception biases, reinforcing the Fed's credibility and enhancing its policy effectivenes.
Subjects: 
central bank communication
partisan
trust
expectations
JEL: 
D83
D84
D72
E70
E31
Document Type: 
Working Paper
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