FOMC Hawk/Dove NLP Score

Overview

This pillar uses Natural Language Processing (NLP) to analyze all public communications from Federal Reserve officials. It quantifies the collective sentiment of the committee, providing a clear signal on whether their stance is becoming more hawkish or dovish.

What It Does

It systematically ingests speeches, testimonies, and meeting minutes from every FOMC member. Using a financial--tuned language model, it scores each communication on a hawk/dove spectrum. These individual scores are then aggregated into a single, weighted index that reflects the committee's overall sentiment and its recent trajectory.

Why It Matters

The Fed's language is deliberately nuanced, but it contains crucial signals about future policy. This pillar cuts through the ambiguity to provide a quantitative measure of sentiment, often revealing shifts in thinking before they are reflected in market prices or analyst reports.

How It Works

First, we collect all official Fedspeak from the Federal Reserve Board and regional bank websites. Each document is processed by our NLP model, which assigns a sentiment score from -1.0 (most dovish) to +1.0 (most hawkish). Scores are weighted based on the speaker's influence, such as their voting status and position, and then combined into a 30-day rolling average to track the trend.

Methodology

Analysis is based on a fine-tuned BERT model trained on a corpus of central bank communications. The final score is a 30-day rolling average of individual member scores. Voting members' scores are weighted 1.5x, and the Fed Chair's score is weighted 2.0x relative to non-voting members to reflect their influence on policy decisions.

Edge & Advantage

This pillar provides a data-driven edge by systematically quantifying sentiment, allowing you to react to subtle changes in Fed communication faster than the broader market.

Key Indicators

• Aggregate Hawk/Dove Score

  high

  The primary output, a single number from -1.0 to +1.0 representing the committee's overall stance.

• Sentiment Momentum

  high

  The 7-day change in the Aggregate Hawk/Dove Score, indicating the direction and speed of a sentiment shift.

• Voter vs Non-Voter Divergence

  medium

  The difference in average sentiment between voting and non-voting FOMC members.

• Key Phrase Frequency

  low

  Tracks the usage of critical terms like 'restrictive', 'data dependent', or 'transitory' in recent communications.

Data Sources

• Federal Reserve Board

  Provides official speeches, testimonies, press conferences, and meeting minutes.

• Regional Fed Bank Websites

  Source for speeches and research papers published by the 12 regional Fed presidents.

Example Questions This Pillar Answers

• → Will the Fed raise rates at the next FOMC meeting?
• → What will the target Federal Funds Rate be by the end of the year?
• → Will the next FOMC statement be more hawkish than the last?

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