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This paper studies why central banks and markets hold different beliefs. I introduce a
model that formalizes three mechanisms for disagreement: asymmetric information about
fundamentals, different perceptions of the policy rule, and different confidence in public
signals. I show how to separately identify these mechanisms using their predictions for
beliefs about multiple variables. In US data, negative macroeconomic news predicts market
over-estimation of interest rates and employment relative to realizations and Federal
Reserve forecasts. The estimates imply that markets slightly misspecify the monetary rule
and are significantly under-confident in public information. Central-bank private information
and “information effects” are quantitatively negligible.