The news feed brings you the headline: "Fed Holds Rates." Only three words that mean absolutely nothing to you. The rates remained the same, but the euro still lost half a percent in just minutes. Here comes the importance of the difference between decision and reaction. In this article, the reasons for reactions when headlines do not change are provided.Why Is the Decision Rarely the SignalBy the time the Fed, ECB, or BOE statement comes out, the rate move is already priced in. What matters is the change in expectations regarding the future policy path – the wording additions, omissions, or modifications compared to the previous release. Research from the Federal Reserve backs this up. Asset prices do not respond to rates themselves but rather to guidance on the policy's future.What Language Does Each Bank SpeakEach central bank has its own signs. In the case of the Fed, pay attention to shifts in the tightening bias and phrases such as "greater confidence" before rate cuts. For the ECB, the phrase "sufficiently long duration" signals the peak in interest rates, whereas "not pre-committing to a particular path" is the current signal that the bank is ready to act. At the BOE, vote splits carry much more meaning than the headlines. For example, the 5-4 decision to hold rates is a completely different thing from a 7-0 decision to hold them.Is There a Faster Way to Read the StatementA workable sequence looks something like this:First, determine whether the rate move is as predicted by the market. If so, the headline is not enough for the explanation.Analyze the wording differences between the previous release and the current one; note what was added, omitted, repeated, or softened/strengthened to indicate a change in stance.Find vote distribution and new outlooks. Vote distribution indicates disagreements among the decision-makers, while new expectations reflect changes in inflation, growth, or rate prognosis. This gives hints of differing opinions within the decision-making process.Look into inflation persistence. Identify whether the focus was on general, wage, service sector, or persistent inflation. This allows us to understand what risks the central bank cares about.Analyze balance sheet statements. Pay attention to how the wording differed when referring to balance sheet operations such as bond purchases, bond sales, bond runoff, and even reinvestment of bonds at unchanged rates.One important pattern here is "hawkish cuts" and "dovish hikes". It is possible to ease policy at the moment, but to signal a slower future pace. This combination of actions is what moves currencies and short-term rates.How to Turn This Into PracticeNone of this requires deep knowledge of economics. It requires the habit – comparing the current statement with the previous one line by line and cross-referencing it to the calendar of upcoming events.JustMarkets Economic Calendar helps to track such events with country and impact filters. In addition to this, the Daily Forecast and Market Overview go one step further and interpret the central bank’s language in regard to the market. Disclaimer: For informational purposes only. Trading financial instruments involves significant risk and may not be suitable for all investors. Ensure you understand the risks involved and trade responsibly.This article was written by FM Contributors at www.financemagnates.com.