Federal Reserve researchers have developed a new measure of credit and financial market sentiment from Twitter Inc. data that they say can help forecast changes in the stance of monetary policy.
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The Twitter Financial Sentiment Index uses natural language processing on the social media platform and can help estimate next-day stock-market returns, the economists said in a paper out this month. They found that sentiment worsens in response to a surprise policy tightening, and the data have some power in predicting how much the central bank will hike interest rates, too.