RWP 20-14, October 2020; updated October 2025
We propose a text-based measure of monetary policy stance that models FOMC statements as convex combinations of dovish and hawkish alternatives, providing a tractable representation of the Committee's position along the policy spectrum. Leveraging staff-drafted alternative statements, we fine-tune a pre-trained language model to capture both quantitative precision and semantic tone. Stance is defined as the product of tone and novelty, and decomposed into expected and surprise components using high-frequency financial data. Surprises arise from shifts in tone relative to expectations or from statement novelty. Our framework enables counterfactuals showing how alternative communication could have moved markets.
JEL Classification: E30, E40, E50, G12
Article Citation
Doh, Taeyoung, Dongho Song, and Shu-Kuei Yang. 2020. “Deciphering Federal Reserve Communication via Text Analysis of Alternative FOMC Statements.” Federal Reserve Bank of Kansas City, Research Working Paper no. 20-14, October. Available at External Linkhttps://doi.org/10.18651/RWP2020-14
The views expressed are those of the authors and do not necessarily reflect the positions of the Federal Reserve Bank of Kansas City or the Federal Reserve System.