Mixed Chatter and Two Rate Holds | MACROCAST

  • Friday, October 21, 2016

Welcome to The Signal’s “Macrocast.” Each week, we provide analysis and forecasting on the most important upcoming central bank communications.

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Federal Reserve
Forecast: Hawkish chatter continues to signal December hike
Analysis: With trend* rising and momentum** somewhat hawkish (0.26), we expect the five Fed speeches this week to point firmly toward a December hike and possibly leave the door open for November. William Dudley and Jerome Powell, the two policymakers to watch most closely, will speak at a conference on the evolving structure of the U.S. Treasury Market.

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European Central Bank
Forecast: To indicate tapering timeline
Analysis: With Draghi, Mersch, and Coeure all speaking about monetary policy this week, we expect Draghi and Mersch will continue their recent hawkish trend while Coeure takes a more neutral stance.

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Swedish Riksbank
Forecast: Likely to hold rates on October 27
Analysis: Despite slower growth in recent months, the Riksbank’s somewhat hawkish momentum (0.30) suggests a rate hold at this week’s meeting.

Norges Bank
Forecast: Likely to hold rates on October 27
Analysis: Due to somewhat hawkish momentum (0.30) and a rising trend, we expect the Norges Bank to hold rates at this week’s meeting despite some speculation of a cut.

Bank of Canada
Forecast: Poloz to express concern over sluggish growth
Analysis: Due to his significantly declining sentiment over the last month, we anticipate dovish talk from Poloz in his October 24 speech. This would signal that the Bank of Canada is setting up for a rate cut in the near future after holding rates at its last meeting.

Swiss National Bank
Forecast: Moderate talk of policy options
Analysis: In the context of a flat SNB sentiment trend (momentum 0.09), we expect Thomas Jordan’s remarks on October 24 to be fairly neutral. He will likely acknowledge that there is room for additional stimulus but little need for it currently.

Central Bank of Turkey
Forecast: Minutes to signal future rate cuts
Analysis: After holding rates last week, the Bank of Turkey’s slightly dovish momentum (-0.18) and declining trend combined with the dovish language in the policy release cause us to expect the minutes and inflation report released on October 27 to clearly signal further stimulus.

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The Signal Team

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* Prattle’s models are based on the historical relationship between central bank language and market reaction, which is used as basis of evaluation for future communications. The scores are normalized around zero and range between -2 and 2, negative numbers indicating dovishness and positive numbers indicating hawkishness.

** Residual scores represent the tone of a communication compared to the rolling, 12-month average for that individual communication type or speaker. Raw scores represent the tone of a communication compared to the average of all communications.

Disclaimer: the forecasts provided herein are based upon sources believed by Prattle Analytics, LLC D/B/A Prattle, to be reliable and to be developed from models which are generally accepted as methods for producing economic forecasts.

Prattle cannot guarantee the accuracy or completeness of the information upon which this Report and such forecasts are based. This Report does not purport to disclose any risks or benefits of entering into particular transactions and should not be construed as advice with regard to any specific investment or instance. The opinions and judgments expressed within this Report made as of this date are subject to change without notice.

Copyright © 2016 Prattle Analytics, LLC.