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arxiv:2603.14313

Mind the Shift: Decoding Monetary Policy Stance from FOMC Statements with Large Language Models

Published on Mar 15
· Submitted by
yixuan
on Mar 17
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Abstract

Federal Open Market Committee (FOMC) statements are a major source of monetary-policy information, and even subtle changes in their wording can move global financial markets. A central task is therefore to measure the hawkish--dovish stance conveyed in these texts. Existing approaches typically treat stance detection as a standard classification problem, labeling each statement in isolation. However, the interpretation of monetary-policy communication is inherently relative: market reactions depend not only on the tone of a statement, but also on how that tone shifts across meetings. We introduce Delta-Consistent Scoring (DCS), an annotation-free framework that maps frozen large language model (LLM) representations to continuous stance scores by jointly modeling absolute stance and relative inter-meeting shifts. Rather than relying on manual hawkish--dovish labels, DCS uses consecutive meetings as a source of self-supervision. It learns an absolute stance score for each statement and a relative shift score between consecutive statements. A delta-consistency objective encourages changes in absolute scores to align with the relative shifts. This allows DCS to recover a temporally coherent stance trajectory without manual labels. Across four LLM backbones, DCS consistently outperforms supervised probes and LLM-as-judge baselines, achieving up to 71.1% accuracy on sentence-level hawkish--dovish classification. The resulting meeting-level scores are also economically meaningful: they correlate strongly with inflation indicators and are significantly associated with Treasury yield movements. Overall, the results suggest that LLM representations encode monetary-policy signals that can be recovered through relative temporal structure.

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đź’¸ This paper introduces an LLM-based framework for decoding monetary policy stance from FOMC statements.

Instead of labeling each statement independently, it models both the absolute tone of a statement and the relative shift across consecutive meetings, producing a temporally coherent hawkish–dovish trajectory without manual annotations.

The resulting scores are both empirically strong and economically meaningful, linking textual policy signals to inflation dynamics and Treasury yield movements.

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