Finance and Economics Discussion Series (FEDS)
July 2025
Gauging the Sentiment of Federal Open Market Committee Communications through the Eyes of the Financial Press
Shantanu Banerjee, Paul Cordova, Michiel De Pooter, and Olesya V. Grishchenko
Abstract:
We apply natural language processing tools to news articles in the financial press to construct a sentiment index—an index of the perceived semantic orientation of monetary policy communications around scheduled Federal Open Market Committee (FOMC) meetings. To that end, we develop several dictionaries that capture various monetary policy tools: conventional monetary policy, asset purchases, and forward guidance. The surprises in the sentiment index around FOMC meetings announcements explain variation in major asset prices classes between May 1999 and November 2022. Sentiment index surprises are important for explaining the variation in asset prices beyond monetary policy surprises.
Keywords: Textual analysis, semantic orientation, sentiment index, Federal Reserve, FOMC, hawkish, dovish, asset prices, policy expectations, conventional monetary policy, asset purchases, forward guidance, zero-lower-bound, COVID
DOI: https://doi.org/10.17016/FEDS.2025.048
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