Mind the Shift: Decoding Monetary Policy Stance from FOMC Statements with Large Language Models
Organizations: The Hong Kong University of Science and Technology
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.
Figures & tables
| Model | Method | Acc. | F1 |
|---|---|---|---|
| – | Dictionary | 0.4458 | 0.5893 |
| FOMC-RoBERTa | Supervised | 0.4337 | 0.5346 |
| Llama-3.2-1B | LLM Judge | 0.5060 | 0.5393 |
| Logit-Based Judge | 0.5301 | 0.6929 | |
| Linear Probe | 0.5542 | 0.6667 | |
| DCS (Ours) | 0.5904 | 0.7119 |
| CPI (YoY) | PPI (YoY) | ||||
| Model | Method | Pearson | Spearman | Pearson | Spearman |
| – | Dictionary | 0.3137 | 0.3837 | 0.2894 | 0.2988 |
| FOMC-RoBERTa | Supervised | 0.3880 | 0.4458 | 0.2884 | 0.2849 |
| Llama-3.2-1B | LLM Judge | 0.2375 | 0.3190 | 0.1516 | 0.1799 |
| Llama-3.2-1B | Logit-Based Judge | 0.0653 | 0.2271 | 0.0597 | 0.1810 |
| Llama-3.2-1B | Linear Probe | 0.1960 | 0.4039 | 0.1554 | 0.3755 |
| 2Y Yield | 10Y Yield | 20Y Yield | |||||
|---|---|---|---|---|---|---|---|
| Model | Method | ||||||
| FOMC-RoBERTa | Supervised | 1.058 | .01 | 0.536 | .01 | 0.402 | .01 |
| Llama-3.1-8B | LLM Judge | 0.854 | .01 | 0.328 | .01 | 0.202 | .096 |
| Llama-3.1-8B | Logit-Based Judge | 0.901 | .01 | 0.299 | .012 | 0.158 | .185 |
| Llama-3.1-8B | Linear Probe | 0.055 | .754 | 0.227 | .067 | 0.326 | .01 |
| Llama-3.1-8B | DCS (Ours) | 0.842 | .01 | 0.796 | .01 | 0.852 | .01 |
| P1 | P2 | P3 | P4 | ||
|---|---|---|---|---|---|
| Inflation | Method | 2003–2008 | 2008–2015 | 2015–2020 | 2020–2025 |
| CPI ( ) | LLM Judge | 0.282 / 0.275 | 0.052 / -0.017 | 0.276 / 0.260 | 0.377 / 0.440 |
| Logits Based Judge | 0.435 / 0.537 | -0.118 / -0.107 | 0.104 / 0.195 | 0.286 / 0.325 | |
| Linear Probe | 0.027 / 0.035 | -0.040 / -0.087 | 0.009 / 0.152 | 0.225 / 0.039 | |
| DCS (Ours) | 0.269 / 0.082 | 0.108 / 0.076 | 0.339 / 0.354 | 0.376 / 0.199 | |
| PPI ( ) | LLM Judge | 0.154 / 0.067 | 0.013 / -0.029 | 0.350 / 0.301 | 0.441 / 0.376 |
Appendix figures & tables8 assets
Supplementary material from the paper’s appendix.
Appendix
| Year | Count | Year | Count | Year | Count | Year | Count |
|---|---|---|---|---|---|---|---|
| 2003 | 8 | 2009 | 8 | 2015 | 8 | 2021 | 8 |
| 2004 | 8 | 2010 | 9 | 2016 | 9 | 2022 | 8 |
| 2005 | 5 | 2011 | 8 | 2017 | 9 | 2023 | 8 |
| 2006 | 8 | 2012 | 8 | 2018 | 9 | 2024 | 8 |
| 2007 | 10 | 2013 | 8 | 2019 | 12 | 2025 | 8 |
| 2008 | 11 | 2014 | 9 | 2020 | 13 | - | - |
| # | Sentence |
|---|---|
| 1 | Inflation remains too high and the Committee is prepared to raise the policy rate further until inflation is clearly moving down toward the objective. |
| 2 | The Committee will maintain a restrictive stance of policy for as long as needed to return inflation to target. |
| 3 | If inflation pressures persist, we will accelerate the pace of tightening and consider larger rate increases. |
| 4 | We are prepared to keep interest rates higher for longer to ensure inflation returns to target in a timely manner. |
| 5 | The Committee is committed to reducing inflation and will not hesitate to tighten policy if necessary. |
| 6 | Balance sheet reduction will continue as planned to further tighten financial conditions. |
| # | Sentence |
|---|---|
| 1 | Inflation has eased meaningfully and the Committee can proceed more cautiously with further policy adjustments. |
| 2 | The Committee will consider pausing further rate increases to assess the effects of prior tightening. |
| 3 | If inflation continues to moderate, it may become appropriate to begin lowering the policy rate over time. |
| 4 | Risks to employment have increased and policy should avoid unnecessary harm to the labor market. |
| 5 | The Committee will be patient and data dependent, and is open to reducing restraint if conditions warrant. |
| 6 | We will slow the pace of tightening and consider maintaining the current rate while monitoring the outlook. |
| Panel | Description | Terms | Role |
|---|---|---|---|
| A1 | Policy and price indicators | inflation expectation; interest rate; bank rate; fund rate; price; economic activity; inflation; employment | Indicator panel |
| A2 | Downward or contractionary movements | anchor; cut; subdue; declin; decrease; reduc; low; drop; fall; fell; decelerat; slow; pause; stable; non-accelerating; pausing; downward; tighten | Directional panel |
| B1 | Real-economy and general indicators | unemployment; growth; exchange rate; productivity; deficit; demand; job market; monetary policy | Indicator panel |
| B2 | Upward or expansionary movements | ease; easing; rise; rising; increase; expand; improv; strong; upward; raise; high; rapid | Directional panel |
| Model | Max Length | LR | Epochs | ||
|---|---|---|---|---|---|
| Llama-3.2-1B-Instruct ( Vaughan et al., 2024 ) | 512 | 0.01 | 2000 | 8.0 | 1.0 |
| Qwen3-4B-Instruct-2507 ( Yang et al., 2025a ) | 512 | 0.0005 | 1000 | 8.0 | 0.1 |
| Llama-3.1-8B-Instruct ( Vaughan et al., 2024 ) | 512 | 0.0005 | 1000 | 1.0 | 1.0 |
| DeepSeek-R1-Distill-Qwen-14B ( Yang et al., 2025b ) | 512 | 0.0005 | 2000 | 5.0 | 0.1 |
| CPI change | PPI change | |
| Intercept | 0.75*** | -3.05*** |
| (0.23) | (1.15) | |
| DCS score | 3.18*** | 12.77*** |
| (0.56) | (2.45) | |
| 199 | 174 | |
| 0.2521 | 0.2303 |
| Variant | Acc. | F1 | CPI ( ) | PPI ( ) |
|---|---|---|---|---|
| Full DCS | 0.6506 | 0.7387 | 0.6237 | 0.5530 |
| w/o | 0.4699 | 0.5000 | 0.3807 | 0.3133 |
| w/o | 0.5904 | 0.7213 | 0.2545 | 0.1521 |
| Single axis | 0.5867 | 0.6436 | 0.5498 | 0.4169 |