Global Macro Chart of the Day: (#108): The Fed‘s transparency reversal

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Global Macro Chart of the Day: (#108): The Fed‘s transparency reversal

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Global Macro Chart of the Day Economics

Global(#108): The Fed's transparency reversal

Arend Kapteyn

Economist

Sounding hawkish, saying little arend.kapteyn@ubs.com

+44-20-7567 0531

If you saw last week's Fed press conference, you don't need an LLM to tell you it

sounded hawkish. However, our Deep Speak model helps quantify hawkishness and

dovishness across multiple dimensions, and benchmarks the result against the Fed’s

communication history. As we show in Deep Speak: Kevin Warsh press conference, the

perception of hawkishness came more from the delivery and the one-sided nature of

communication than from substance. There was a near absence of 'dovish/explicitly

dovish' remarks (down to 16% from 32% in Powell’s last press conference), and a

corresponding increase in 'hawkish/explicitly hawkish' content to 83% (from 53%).

The most striking stat, however, is the following: our model estimates that only 5% of

the press conference was 'policy relevant' and 95% not relevant. That compares to an

average of 27% policy relevant content during Powell's press conferences, and 15% in

his last press conference. Relevance is calculated by dividing the number of sentences

about growth, inflation, labour market, interest rates and balance sheet that are also

directionally relevant, by total sentences. So these sentences are not only about those

topics, but also imply or express a directional stance/sentiment; e.g. "inflation is

falling"= Inflation, Relevant; "the staff reviewed price developments"=Inflation,

Irrelevant.

So, yes, as a percentage of what was said it sounded hawkish, but the absolute number

of statements were very few.