Hidden Dissent and the Fed

 

The markets were in an uproar over the dissents at the last FOMC meeting, and they may be expecting further dissent at the July meeting. Yes, dissent announces and measures dissent, but there are other ways to measure dissent that may be more useful. Researchers can look at the comments of Fed governors and bank presidents to measure dissent. The use of NLP and LLMs can count words, form sentiment indices, and use context to measure differences of opinion over time. 

Two researchers have examined transcripts and minutes from Fed officials to measure what they call “hidden dissent.” Their index is available through their website, digitecon.org. Their index correlates with dispersion in SEP forecasts. Markets respond to dissent across the Fed.