Mind the Shift: Decoding Monetary Policy Stance from FOMC Statements with Large Language Models
The Delta-Consistent Scoring (DCS) framework is an annotation-free method that uses frozen Large Language Models to assign continuous hawkish or dovish stance scores to FOMC statements. Instead of looking at statements in isolation, DCS models both the absolute tone of a statement and how that tone shifts between consecutive meetings. This approach outperforms existing methods and yields scores strongly correlated with inflation and Treasury yields.