What, me worry? Fed chief’s emotional tone can drive markets, study suggests

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WASHINGTON, July 21 (Reuters) – Jerome Powell took over as head of the Federal Reserve in 2018 pledging a plain-spoken, language-of-the-people approach to talking about monetary policy.

It turns out that’s a bit of a downer: New research using artificial intelligence and voice analytics rates Powell as the most negative of the last three chairs of the U.S. central bank, with his predecessor Janet Yellen the best able to maintain a neutral tone at her news conferences and Ben Bernanke before that a comparative cheerleader.

Markets, in turn, may have noticed. The authors of the research – Yuriy Gorodnichenko of the University of California, Berkeley, and United Kingdom researchers Tho Pham and Oleksandr Talavera – found that the Fed chair’s emotional tone at news conferences influences stock prices independent of the meaning of the words used.

The effect, as much as 200 basis points on the S&P 500 (.SPX) index for a shift from a positive to a negative tone…

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