Ryan Byun, Bennett Fees, Margaret M. Jacobson, and Todd B. WalkerCentral bank communications, particularly FOMC statements and press conferences, play a crucial role in shaping financial market expectations. Using large language models to quantify central bank content, this paper demonstrates how sentiment aligns with traditional market-based monetary policy measures. We show that press conferences correlate with future policy to a greater extent than other communications. While FOMC statements coarsely signal the current stance of policy, press conferences fine-tune the message, which helps market participants revise their expectations about future policy.
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