The voice of monetary policy

As I mentioned recently, a new version of the surveillance society is on its way:

We develop a deep learning model to detect emotions embedded in press conferences after the Federal Open Market Committee meetings and examine the influence of the detected emotions on financial markets. We find that, after controlling for the Federal Reserve’s actions and the sentiment in policy texts, a positive tone in the voices of Federal Reserve chairs leads to significant increases in share prices. Other financial variables also respond to vocal cues from the chairs. Hence, how policy messages are communicated can move the financial market. Our results provide implications for improving the effectiveness of central bank communications.

That is by Yuriy Gorodnichenko, Tho Pham, and Oleksandr Talavera, and it is a new piece in the American Economic Review.  This game of course has just started, and countermeasures will at some point arrive.  You may recall I discussed exactly these possibilities in my 2013 book Average is Over.