Monetary Policy Tracking and Central Bank Language Analysis
Analyze monetary policy statements to track the trend in hawkish/dovish sentiment as an indicator on future cash rate movements
Last Updated: 30 Oct 2025 (v3 with term frequency and TF-IDF functions)
Objective:
Analyze and quantify the progression of sentiment (dovish to hawkish) in successive central bank statements. Extract associated information regarding central bank projections and compare comments to market expectations for rates.
Explanation:
Rate decisions move markets - equities, currencies, bonds and even crypto. We can get to the heart of the signals and block any noise from Central Bank and FOMC statements, minutes and transcripts by employing AI sentiment analysis.
AI models are incredibly proficient at extracting quantifiable sentiment scores from documents given the way they vectorize language into mathematical representations with embedded contextual meaning. This means that sentiment scores produced by AI models are not subjective assessments like you or I might make when reading a statement, but a bias-free, calculation based on relative language representations.
That makes this analysis valuable for investors. It can be performed within seconds of a central bank release, like FOMC statement, minutes and transcripts being published. Quantitative sentiment scores allow you monitor the progression of central bank thinking through time, comparing sequential meetings so you capture not just the statement itself but the change in thinking and nuance.
As always, be aware that models can make mistakes. At each step, examine the response and challenge information or conclusions that appear erroneous before proceeding to any subsequent steps. If in doubt use a second model with the same prompt to verify the information and generate challenge questions and answers (CoVe process) to correct interpretations of data.
Link to blog post explanation:
Preferred Model(s):
ChatGPT-5+ is preferred for sentiment related analysis tasks based on performance
Important Execution Notes:
It is strongly recommended to download and attach (or past in the URLs of) the central bank statements from its website to the prompt in order to avoid the model referring to lagging memory prior to its training cut-off.
The prompt is presented below with a Lite version and a Professional version depending on the level of detail in response and verifications the investor requires.
Note that sentiment scores are best interpreted as relative to each other, rather than absolute in magnitude.
Sample Output
Copy/Paste Prompt Set:
Important note: Subscribers can use this prompt set for their own analysis. However, the prompt is copyrighted by The Inferential Investor, paywalled, and must not be shared without permission.