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fomc-communication-counterfactual

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Household spending was projected to grow at a fairly solid rate, supported by higher employment and somewhat lower energy prices but damped somewhat by lessened stimulus from gains in wealth and the need for households to rebuild savings.
2,020
1
hawkish
2
1
1
The possibility that longer-term inflation expectations may have edged down was roughly counterbalanced by the risks that somewhat firmer inflation this year could be more persistent than expected, particularly in an economy that was projected to continue operating above its long-run potential.
2,012
1
hawkish
2
2
2
With inventories lower, firms were beginning to raise production to meet at least a portion of increased demand, and this adjustment was expected to make an important contribution to economic recovery in the fourth quarter of the year and, to a lesser extent, in 2010 as well.
1,999
2
neutral
1
3
3
The near-term forecast again entailed a marked downshift in headline inflation as energy prices fall back consistent with readings from futures markets.
2,016
0
dovish
2
4
4
As students of economics, you may already know that the Federal Reserve conducts monetary policy to support a strong and stable economy in the United States.
2,022
2
neutral
1
5
5
In particular, incoming data and anecdotal information indicated that economic activity had appreciably more forward momentum than previously perceived and that inflation pressures could be intensifying.
2,003
1
hawkish
2
6
6
Microeconomic studies provide corroborating information to the macroeconomic evidence of a post-1995 acceleration in productivity growth.
2,017
0
dovish
2
7
7
Even after adjusting for the effects of strikes on reported payrolls, the employment report for August showed weak job gains.
2,004
0
dovish
2
8
8
You know, it’s interest rates, it’s risk spreads, it’s currency, it’s the stock market, it’s credit availability, it’s many, many factors.
2,019
2
neutral
1
9
9
The fundamentals underlying capital spending continued to be supportive, as business sector output expanded briskly, firms remained flush with funds, and relative price declines for high-tech equipment continued to push down its user cost.
2,007
1
hawkish
2
10
10
Everyone, particularly people on fixed incomes, and at the lower part of the income distribution are better off with stable prices.
2,021
2
neutral
1
11
11
Core inflation, which excludes energy and food prices, has been running close to 1½ percent.
2,017
0
dovish
2
12
12
These participants cited, for example, the still-elevated levels of long-term unemployment and workers employed part time for economic reasons as well as low labor force participation.
2,002
0
dovish
2
13
13
Members agreed that they would continue to closely monitor inflation indicators and global economic and financial developments.
1,998
2
neutral
0
14
14
Participants agreed that the labor market had remained strong over the intermeeting period and that economic activity had risen at a moderate rate.
2,004
2
neutral
0
15
15
The effects of the saving outflow may thus have been felt disproportionately on U.S. interest rates and the dollar.
2,005
0
dovish
2
16
16
Also, in the view of a number of participants, the economy was possibly producing in the neighborhood of its potential, and the persistent strength in spending of late suggested that resource markets could tighten further and inflation pressures build.
2,001
1
hawkish
2
17
17
Moreover, inflation was running at a fairly low rate and quite possibly would edge down a little further over coming quarters.
2,019
0
dovish
2
18
18
that is, the capacity utilization rate is lower than would have been expected, based on past experience, at the prevailing unemployment rate.
2,005
0
dovish
2
19
19
Hungary and Poland adopted inflation targeting following parliamentary acts stipulating that price stability was the main objective for the central bank.
2,003
1
hawkish
2
20
20
1 The longer-run projections represent each participant's assessment of the rate to which each variable would be expected to converge, over time, under appropriate monetary policy and in the absence of further shocks to the economy.
2,011
2
neutral
1
21
21
And I fully expect it will return to solid growth and a solid labor market as well.
2,019
2
neutral
1
22
22
However, other measures of labor utilization--including the labor force participation rate and the numbers of discouraged workers and those working part time for economic reasons--suggested more modest improvement, and other indicators of labor demand, such as rates of hiring and quits, remained low.
2,006
2
neutral
0
23
23
The productivity boom after the Civil War resulted from a variety of technological advances, including the expansion of and improvements in the use of steam power, railroad transportation, and communication by telegraph.
2,022
2
neutral
0
24
24
But if the economy instead began to overheat, threatening to push inflation to an undesirably high level, the FOMC would have ample scope to respond through tighter monetary policy.
2,000
1
hawkish
2
25
25
Several other participants, however, noted that increases in excess reserves or the monetary base, by themselves, might not have a significant stimulative effect on the economy or prices because the normal bank intermediation mechanism appeared to be impaired, and banks may not be willing to lend their excess reserves.
2,010
2
neutral
1
26
26
Members referred, however, to a number of favorable factors that should continue to support at least moderate further growth in business investment, including the attractive pricing of and ongoing rapid technological improvements in computer and communications equipment and the wide availability of equity and debt financing on favorable terms to business firms.
1,997
2
neutral
1
27
27
One participant suggested that the Committee could announce an additional, lower set of thresholds for inflation and unemployment
1,999
2
neutral
0
28
28
Indicators of supply and demand conditions for small business credit were generally unchanged over the past quarter, with demand appearing to remain weak.
2,014
2
neutral
1
29
29
Survey measures of expected future inflation were fairly stable,
1,999
2
neutral
0
30
30
As we all know, starting in late February or March of last year, widespread economic and social lockdowns and other effects of the pandemic caused the swiftest and deepest contraction in employment and economic activity since the Great Depression.
2,004
0
dovish
2
31
31
Business contacts in a number of Districts noted an improvement in housing activity and a continued rise in house prices, although their reports showed that the pace of sales and construction varied across regions.
2,000
1
hawkish
2
32
32
Assisted by the whole array of market prices, entrepreneurs seek to identify the types of products and services that individuals will value, especially the added value placed on products and services that customers find better tailored to their particular needs, delivered in shorter time frames, or improved in quality.
2,004
2
neutral
0
33
33
Some participants noted that communications about the appropriate path of policy would be a focus of market participants in the current environment and commented that it would be important to emphasize that the Committee's reaction function or commitment to its monetary policy framework had not changed.
2,009
2
neutral
1
34
34
Implications for Monetary Policy In summary, there appears to be some possibility that the recent trend toward disinflation will continue, primarily because of the potentially large amount of economic slack in the system.
2,019
0
dovish
2
35
35
However, I can provide you with some insight into the way the FOMC functions and the impact of monetary policy on the U.S. and global economies.
2,007
2
neutral
1
36
36
To anticipate a bubble about to burst requires the forecast of a plunge in the prices of assets previously set by the judgments of millions of investors, many of whom are highly knowledgeable about the prospects for the specific companies that make up our broad stock price indexes.
2,022
2
neutral
1
37
37
Consumer price inflation was being held down by weaker demand and significantly lower oil prices.
2,012
0
dovish
2
38
38
Much of this performance was fueled by an investment boom that also contributed importantly to rapid growth in labor productivity.
2,013
0
dovish
2
39
39
Many members concluded that because there did not seem to be any urgency to tighten current policy for domestic reasons, given the likelihood that inflation would remain subdued for a while, important weight should be given to potential reactions abroad.
2,013
0
dovish
2
40
40
With the Committee in the process of reviewing its monetary policy strategies and communication, and no additional accommodation being provided at this meeting, a few members indicated that they could support the Committee's decision even though they had not favored recent policy actions.
2,007
2
neutral
1
41
41
In addition, increases in oil prices were expected to pass through to consumer energy prices.
2,015
1
hawkish
2
42
42
Another participant mentioned, however, that recent sluggish growth of the monetary aggregates suggested that the stance of policy was not overly accommodative.
2,002
0
dovish
2
43
43
In this case, there may be no problem for monetary policy.
2,020
2
neutral
1
44
44
This allows the economy to operate at a higher utilization rate without inflationary consequences, at least until the higher productivity is fully anticipated in wage bargaining or until productivity growth stops accelerating.
2,021
2
neutral
0
45
45
Such increases in productivity along with slack in foreign economies contributed to the very strong competition in most markets that was continuing generally to suppress efforts to raise prices.
1,999
2
neutral
1
46
46
In response to the resulting high inflation, the Fed was obliged to raise interest rates, and the economy weakened.
2,005
1
hawkish
2
47
47
When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. "
2,009
1
hawkish
2
48
48
also, continued solid economic growth abroad was expected to boost the growth of U. S. exports for some period ahead.
2,015
0
dovish
2
49
49
It was suggested that the weakening expansion of expenditures in these capital goods might reflect a surfeit in capacity following a period of extraordinary growth in many industries--for example, those related to fiber optics.
2,021
2
neutral
1
50
50
Although the unemployment rate edged up to 5.
2,017
0
dovish
2
51
51
On a 12-month basis, both overall inflation and core inflation, which excludes changes in food and energy prices, had remained near 2 percent.
2,010
2
neutral
1
52
52
Several participants reported that business contacts had expressed growing concerns about the increase in their input costs and that there were signs that an increasing number of firms were seeking to pass on these higher costs to their customers in the form of higher prices.
2,014
1
hawkish
2
53
53
Now, with inflation below 2 percent, I think it’s appropriate that the labor market be that tight.
2,021
0
dovish
2
54
54
At the conclusion of the discussion, the Committee voted to authorize and direct the Federal Reserve Bank of New York, until it was instructed otherwise, to execute transactions in the SOMA in accordance with the following domestic policy directive: "Consistent with its statutory mandate, the Federal Open Market Committee seeks monetary and financial conditions that will foster maximum employment and price stability.
2,016
0
dovish
2
55
55
Recent data suggested that growth of household spending had picked up, while business fixed investment had continued to grow strongly.
2,007
1
hawkish
2
56
56
The ultimate responsibility for price stability rests with the Federal Reserve.
2,021
2
neutral
0
57
57
Because inflation expectations are now more firmly tied down, surges and declines in energy prices do not significantly affect core inflation and thus do not force a policy response to inflation to the extent they did three decades ago.
2,003
0
dovish
2
58
58
And those don’t—those, frankly, don’t carry significant implications in the long run for the—for inflation or for the American economy.
2,017
2
neutral
1
59
59
Indeed, the website of the Central Bank of Brazil explicitly acknowledges the role of inflation in driving financial innovations that enabled firms and households to economize on cash balances in that country.
2,021
2
neutral
0
60
60
Moreover, many members saw some risk that an easing move at this point might trigger a strong further advance in stock market prices that would not be justified on the basis of likely future earnings and could therefore lead to a relatively sharp and disruptive market adjustment later.
2,019
2
neutral
1
61
61
Most FOMC participants anticipate that inflation will gradually move up to the FOMC's 2 percent target over coming years.
2,013
0
dovish
2
62
62
The unemployment rate fell to 5.
2,003
1
hawkish
2
63
63
Because long-term interest rates can remain low only in a stable macroeconomic environment, these goals are often referred to as the dual mandate
2,007
2
neutral
0
64
64
At the time of our FOMC meeting in January, prospects for continued economic growth remained favorable, and we judged that monetary policy was well positioned to support that outlook.
2,017
0
dovish
2
65
65
Although participants considered it unlikely that the economy would reenter a recession, many expressed concern that output growth, and the associated progress in reducing the level of unemployment, could be slow for some time.
2,005
0
dovish
2
66
66
For example, core CPI (consumer price inflation) prices fell 0.4 percent in April, the largest monthly decrease since the beginning of the series in 1957.
2,004
0
dovish
2
67
67
A widespread view that the Federal Reserve would take whatever steps were needed to hold down inflation over time probably had contributed to the persistence of subdued long-run inflation expectations during an extended period when rapidly rising demand was pressing on limited supply resources.
2,022
2
neutral
0
68
68
As illustrated by the left-hand panel of figure 6, since 2000, both FOMC participants and respondents to the Blue Chip survey have markedly reduced their projections of the level of real short-term interest rates expected to prevail in the longer run.
2,022
0
dovish
2
69
69
A currency board and dollarization are tighter versions of a fixed exchange rate regime--that is, fixed exchange rate systems from which it is progressively more costly to exit.
1,997
2
neutral
1
70
70
Many members were concerned about the still-sensitive state of financial markets and thought that an easing of policy would help to support improvements in market functioning, thereby mitigating some of the downside risks to economic growth.
2,013
0
dovish
2
71
71
Core measures of price inflation had moved up over recent quarters and particularly so over the last few months.
2,000
1
hawkish
2
72
72
But it’s not easy to get a clear read on the implications of asset prices for the overall outlook.
2,020
2
neutral
0
73
73
labor productivity remained on a strong upward trend.
2,014
0
dovish
2
74
74
He thought future developments were equally likely to warrant an action in either direction, and he did not think the Committee should take a step that probably would cause expectations of further easing to become embedded in market interest rates.
2,019
2
neutral
1
75
75
Participants commented that an increase in inflation from recent rates could have especially adverse effects on longer-run economic performance.
2,003
1
hawkish
2
76
76
The uncertainty about the threshold unemployment rate also suggests a differing degree of intensity in the response of monetary policy to deviations of inflation and output to their respective targets.
2,021
2
neutral
0
77
77
The drop in demand leads, in turn, to a decline in actual output relative to its potential, that is, the level of output that the economy can produce at the maximum sustainable level of employment.
2,004
0
dovish
2
78
78
Economic DevelopmentsReal economic activity has continued to expand at a solid pace.
1,997
1
hawkish
2
79
79
To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens.
1,998
0
dovish
2
80
80
Demand-pull inflation pressures from emerging-market economies abroad appeared to be continuing, and anecdotal reports from business contacts suggested greater willingness domestically to pass rising costs through to prices.
2,016
1
hawkish
2
81
81
core measures of consumer prices showed mixed changes on a twelve-month basis.
2,020
2
neutral
0
82
82
Another difficulty in assessing the current amount of slack in the economy, and a third uncertainty, concerns the divergent patterns in alternative measures of excess demand.
2,006
2
neutral
0
83
83
The Federal Open Market Committee seeks monetary and financial conditions that will foster price stability and promote sustainable growth in output.
2,002
2
neutral
0
84
84
The Chairman testifies frequently before the Congress, with the one-year record being twenty-five appearances in 1995, although only seven were directly about monetary policy.
2,005
2
neutral
1
85
85
And so what that means is the Federal Reserve cannot add monetary accommodation by cutting short-term interest rates, the usual approach.
2,020
2
neutral
1
86
86
During most of the recent episode, monetary policy broadly followed the Taylor Rule prescription, while holding the nominal federal funds rate about unchanged.
2,017
2
neutral
1
87
87
After the stock-market decline that began in March 2000, new capital investment and thus the demand for financing waned around the world.
2,007
1
hawkish
2
88
88
So we want to see that healthy process unfold as we decide what the true state of the economy is, and we think it will evolve in a way that will mean lower inflation.
2,019
0
dovish
2
89
89
That is, it was thought that by accepting a modest increase in the inflation rate, policy could achieve a permanently lower rate of unemployment.
2,002
0
dovish
2
90
90
Many foreign central banks tightened monetary policy to address high inflation.
2,013
1
hawkish
2
91
91
In determining how long to maintain a highly accommodative stance of monetary policy, the Committee will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments.
2,018
0
dovish
2
92
92
However, given the good pace of economic expansion since then, it would stretch credulity to believe that capacity growth has accelerated at a sufficient pace to produce a large degree of slack at this moment.
2,005
1
hawkish
2
93
93
Indeed, some expressed the concern that, with the persistence of considerable resource slack, inflation might run below mandate-consistent levels for some time.
2,016
0
dovish
2
94
94
To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens.
1,998
0
dovish
2
95
95
The System Open Market Account manager and the secretary will keep the Committee informed of ongoing developments regarding the System's balance sheet that could affect the attainment over time of the Committee's objectives of maximum employment and price stability. "
2,010
2
neutral
0
96
96
There’s a lot more demand for risk sharing, for liquidity services, and so on.
2,015
2
neutral
0
97
97
The effects of reduced monetary and fiscal policy stimulus were expected to be counterbalanced by continued low long-term interest rates and an abatement of energy-related headwinds.
2,009
2
neutral
1
98
98
So unemployment has tended to go up much faster for minorities and for others who are—tend to be at the low end of the income spectrum.
2,021
0
dovish
2
99
99
So, there has been impact through lower interest rates, but I think more broadly is the indirect effects.
2,014
0
dovish
2
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Dataset adapted from original work by Shah et al.

About Dataset

The dataset is a collection of sentences from FOMC speeches, meeting minutes and press releases (see corresponding paper). A subset of the data has been manually annotated as hawkish, dovish, or neutral.

Label mapping

  • LABEL 2: Neutral
  • LABEL 1: Hawkish
  • LABEL 0: Dovish

Counterfactual generation split

Additionally, for counterfactual generation tasks, we add a custom split with target classes in test_with_targets.csv

Cite

If you want to use this dataset, please consider citing the corresponding paper:

@inproceedings{shah-etal-2023-trillion,
    title = "Trillion Dollar Words: A New Financial Dataset, Task {\&} Market Analysis",
    author = "Shah, Agam  and
      Paturi, Suvan  and
      Chava, Sudheer",
    booktitle = "Proceedings of the 61st Annual Meeting of the Association for Computational Linguistics (Volume 1: Long Papers)",
    month = jul,
    year = "2023",
    address = "Toronto, Canada",
    publisher = "Association for Computational Linguistics",
    url = "https://aclanthology.org/2023.acl-long.368",
    doi = "10.18653/v1/2023.acl-long.368",
    pages = "6664--6679",
    abstract = "Monetary policy pronouncements by Federal Open Market Committee (FOMC) are a major driver of financial market returns. We construct the largest tokenized and annotated dataset of FOMC speeches, meeting minutes, and press conference transcripts in order to understand how monetary policy influences financial markets. In this study, we develop a novel task of hawkish-dovish classification and benchmark various pre-trained language models on the proposed dataset. Using the best-performing model (RoBERTa-large), we construct a measure of monetary policy stance for the FOMC document release days. To evaluate the constructed measure, we study its impact on the treasury market, stock market, and macroeconomic indicators. Our dataset, models, and code are publicly available on Huggingface and GitHub under CC BY-NC 4.0 license.",
}
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