Dragos Gorduza, Livia Silva Paranhos and Ivan Yotzov

Monetary policy decisions reflect incoming data, forecasts, and policymaker preferences. In this post, we use large language models (LLMs) to analyse Bank of England Monetary Policy Committee (MPC) transcripts from 2015 to 2017. We extract structured measures of individual views on inflation and growth, and the narratives justifying policy decisions. This gives a new perspective on UK monetary policy makers’ reasoning, using recently published transcripts. We show that concerns about economic growth relative to its potential weakened and later strengthened over the sample, while concerns about above-target inflation increased. We link these measures to voting behaviour and show that, over the sample period, both growth and inflation measures predict votes for higher rates, but only growth measures explain votes to cut Bank Rate.

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