From Tone to Trajectory: Continuous Sentiment and the Shape of Monetary Policy Communication

Central bank press conferences are not merely information releases — they are structured narratives. We study whether the shape of sentiment within a statement, not just its average tone, carries policy-relevant signals. Constructing sentiment arcs for ECB press conferences along three dimensions — monetary policy stance, economic outlook, and uncertainty — we assess their predictive content for policy rate changes and inflation expectations. Our findings show that arc shape robustly predicts rate decisions beyond lexicon-based benchmarks: it is not merely whether a statement sounds hawkish or economically optimistic on average, but how these sentiments are sequenced, emphasized, and sustained across the statement, that carries the policy signal. Arc features also shape how professional forecasters update inflation expectations, pointing to a receiver-side effect distinct from the direct policy signal. Our results are robust to a range of additional exercises, including different sample splits as well as controlling for the content of the statement. They also carry over to a short sample of Fed press conferences. These findings suggest that the sequencing and emphasis of policy language across a statement is a first-order feature of the policy signal, not a second-order refinement.