We measure the tone (sentiment) of the ECB's Governing Council regarding economic outlook at the time of each monetary policy meeting and use this information together with the Eurosystem/ECB staff macroeconomic projections to directly estimate the Governing Council's loss function. Our results...

We depart from the common reaction function-based approach used to infer central bank preferences. Instead, we extract the tone from the textual information in the central bank communication using both a lexicon-based approach and a language model. We combine the tone with real-time information...