UBS Tracks Central Bank Policy Tones Using LLM: Fed and ECB More Hawkish, BoJ Momentum Slows Down

Overview

This report introduces UBS’s LLM-based approach for tracking central bank policy tones, analyzing policy-related statements from speeches, interviews, and press conferences by the Fed, ECB, and BoJ, and scoring them along hawkish/dovish dimensions. The dataset is updated daily, covers over two decades, and is accessible via an interactive dashboard and Python API.

Core views

The core finding is that the Fed and ECB’s policy communications have generally become more hawkish, while the BoJ’s hawkish momentum has stalled. For the Fed, inflation concerns have once again become the key driver behind the strengthening tone, with no significant offset from growth and labor markets; for the ECB, the inflation-driven hawkish reaction following the Middle East conflict persists, accompanied by increased attention to slowing growth; for the BoJ, after a rapid hawkish shift in the second half of 2025, communication in 2026 has become less frequent, causing the index to flatten, and its statements on growth, policy, and inflation have turned more cautious.

Analysis framework

The report inputs central bank officials’ speeches, interviews, and press conference transcripts into an LLM, identifies policy-related sentences, and breaks down hawkish/dovish contributions by topic and speaker. Key analysis areas include the overall tone index, theme-driven factors such as inflation/growth/employment/interest rates, changes in chair or governor press conference tones, and the distribution of contributions across different speakers.

Methodology notes

• Natural Language ProcessingLLM Central Bank Tone Scoring

  Hawkish/Dovish Sentiment Tracking

  Using large language models to analyze central bank communication texts, policy-related statements are scored as hawkish or dovish; positive scores indicate net hawkishness, while negative scores indicate net dovishness.

• Topic DecompositionPolicy Theme Contribution Analysis

  Theme-driven factors such as inflation, growth, employment, interest rates, and balance sheets

  Breaking down overall tone changes into different macro policy themes to determine which narratives are driving hawkish or dovish shifts.

• Speaker AttributionCentral Bank Official Contribution Analysis

  Standardized contribution by speaker

  The report standardizes contributions based on the number of sentences each speaker contributes within the same period, allowing comparison of different officials’ contributions to overall tone changes.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• U.S. Interest Rates and Dollar Assets

  Fed tone closer to neutrality but still inflation-driven hawkish

  Strengths

  Growth and labor market statements are more stable, and policy is described as being in a relatively appropriate position.

  Weaknesses

  Inflation concerns have not been fully offset by slowing growth, potentially restraining expectations of rate cuts.

  Comparison

  Compared to the ECB, the Fed’s hawkish shift comes less from explicit rate guidance and more from improved growth and employment statements.

  Risks

  If inflation narratives strengthen further, risks of higher interest rates and dollar volatility could increase.

• Eurozone Interest Rates and Euro Assets

  ECB remains hawkish driven by inflation language

  Strengths

  The inflation risk narrative is clear, and Lagarde and multiple speakers maintain an overall hawkish tone.

  Weaknesses

  Growth and labor market tones have started to weaken, presenting a stagflation-like configuration.

  Comparison

  The ECB’s response after the Middle East conflict is clearer than the BoJ’s and more reflective of an inflation-driven hawkish continuation than the Fed’s.

  Risks

  If growth slowdown deepens, the market may reprice the sustainability of the ECB’s hawkish stance.

• Japanese Interest Rates and Yen Assets

  BoJ hawkish momentum enters a plateau phase

  Strengths

  Strong policy normalization signals accumulated in the second half of 2025.

  Weaknesses

  Communication became sparser in 2026, and the tone on growth, policy, and inflation has turned cautious.

  Comparison

  Unlike the Fed and ECB, whose tones continue to strengthen, the BoJ’s latest index has flattened due to a lack of new signals.

  Risks

  If subsequent communication remains sparse, market confidence in the pace of policy normalization could decline.

Key data

• Data CoverageOver two decadesThe report states that the LLM dataset covers over two decades of policy communications from the Fed, ECB, and BoJ, and is updated daily.
• Latest Fed ToneCloser to neutrality but no longer clearly dovishFed communication has moved closer to neutrality compared to the last update, with stronger inflation language and continued but no longer sharply worsening labor market concerns.
• Powell’s Press ConferenceSlightly more hawkish than in MarchThe more hawkish reading comes mainly from more positive or reassuring statements on growth and labor markets; the model identifies the core message as ‘in a good place.’
• Latest ECB ToneSignificantly more hawkish after the Middle East conflict and recently re-strengthenedThe strong inflation shock has yet to be fully offset by slower growth and labor markets.
• Lagarde’s Press ConferenceSlightly more hawkish than in MarchThe firmer inflation language is partly offset by more cautious tones on growth and employment; the core message remains one of observation and waiting.
• Latest BoJ ToneHawkish momentum stallsCommunication has become sparser since 2026, and the tone on growth, policy, and inflation has turned more cautious.

Impact & implications

For investors, the hawkish tone from the Fed and ECB means that interest rate paths remain sensitive to inflation narratives, and bond duration, FX, and risk asset valuations could continue to be affected by changes in central bank rhetoric. The flattening BoJ signal suggests that the market should not simply extrapolate the pace of the hawkish shift from the second half of 2025; instead, it needs to pay attention to subsequent communication density and policy confirmations.

Risks

• The report is based on LLM text scoring, so results depend on the model’s consistent identification of policy semantics, context, and thematic attribution.
• Some chart visual information is unreadable; precise numerical values should be based on UBS’s original dataset and dashboard.
• Central bank communications can change rapidly due to geopolitical events, inflation data, and financial conditions.
• Multi-asset investments carry market risk, credit risk, interest rate risk, and FX risk, and correlations may also deviate from historical patterns.

What to watch

• Whether the Fed’s subsequent inflation, growth, and labor market rhetoric will continue to lack dovish offsets.
• Whether Powell and key speakers like Barr and Waller will further differentiate their tones.
• Whether the ECB’s inflation-driven hawkish rhetoric can continue to outweigh weaker growth and employment signals.
• Whether Lagarde will move from ‘observation and waiting’ toward more explicit rate guidance.
• Whether the BoJ’s communication frequency will recover in 2026 and whether its tone on growth, policy, and inflation will turn hawkish again.