Last week we waxed philosophical about the importance of visulizations in finance. This week we get to practice what we preach. With the results of the latest FOMC meeting rapidly approaching, we wanted to update our FedViz app to incorporate all the statements up until now.
For those who missed the first incarnation, this is a visualization of the top phrases used in each Federal Reserve interest rate decision statement. This is a bipartite graph, meaning that each green node represents a phrase such as “economic activity” while each pink node represents the FOMC statement released on that date.
Rolling your mouse over (or clicking) a node highlights the links between topics and statements, showing at a glance how the Fed’s language has changed over time.
To be specific, we used a script to download the FOMC statement for each date all the way back to March of 2012. Then we extracted the top two-word (bigram) collocations from each text. Collocations are words which appear together more than can be attributed to random chance. This provides a programmatic way to extract topics from a block of text. You can do this yourself using Python’s Natural Language ToolKit (NLTK)
Click on the images below to see the full graph at MKTSTK.com
Here’s an assortment of the most important topics from the last meeting:
- economic activity
- target range
- labor market
- price stability
- medium term
- market activity
In particular, the phrase “medium term” is a recent addition to the Fed’s rhetoric, first appearing in the March 2015 meeting.
Notably absent from the last meeting was the term “energy prices” suggesting the Fed has shifted its attention away from the deflationary impact of collapsing commodity prices. Instead, the Fed is focused more on “market indicators,” a phrase which first appeared in July of 2014 and has been present in every statement since.
For more financial visualizations and plenty of quant-minded discussion of financial markets, make sure to check out Quantocracy.
We’ve closed the signup for the SliceMatrix Beta period. We’ve been busy taking the suggestions you have communicated and evolving the platform accordingly. Expect exciting updates over the next few weeks!!