Abstract

This paper examines how natural language processing algorithms, utilizing textual analysis, can aid in comprehending the decision-making process of the Federal Open Market Committee (FOMC) and the factors influencing its monetary policy decisions in periods of high inflation, specifically, Feb 1979–Dec 1986 and Feb 2018–Feb 2023. The analysis uncovers common themes such as the economy and growth, along with remarkable differences in the language used. Volcker’s focus was on combating high inflation through interest rates, economic growth, and money supply, whereas Powell’s focus centered on discussing inflation more than relevant policy responses such as interest rates or asset purchases. These findings suggest that unlike Powell, Volcker took high inflation as a given and concentrated on policy actions to fight inflation, which he successfully managed.