Political institutions increasingly communicate complex ideas to the public byway of press releases or social media. When asked directly, members of the public often report that they do not understand economic policy and find it complicated or unintelligible; this is especially true for monetary policy. Embedding a vignette experiment into two waves of a panel survey on German households, we examine the influence of monetary policy communications on households’ inflation expectations. We find that when presented with more precise information, households down-weight their priors and update in line with given information. We also examine whether those that are more news savvy, those who have favorable opinions of the European Central Bank (ECB), and those with closer policy preferences respond more (or less) to monetary signals. We find evidence that business news readers have stickier priors, while those with more favorable opinions of the ECB are most likely to be influenced by ECB communications. Finally, in examining the persistence of effects one year later, we find that, the conditioning on prior forecasts one-year ago, shorter and more precise statements exert a larger influence on inflation expectations. Our results are important for understanding the ways in which governmental actors inform the public on complicated policy topics and demonstrates how political opinions condition the effectiveness of central bank communications.
