Welcome to The Signal’s weekly “Macro Minutes.” Each week, we analyze the most important communications from a specific region and provide insight based on our quantitative analysis of central banks.
The Fed announced yesterday that the target range for the federal funds rate would be held at 1/4 to 1/2 percent. Not only did this decision match our forecast, but the statement’s residual* score of 0.07 (raw score -0.51) was nearly identical to our projected residual score of 0.08.
The statement was slightly more hawkish than the baseline for FOMC statements over the past year–and the most hawkish since January 2016. Although this optimistic outlook made headlines, Prattle users were able to anticipate the statement’s tone days in advance and utilize this information to appropriately size their trading positions.
The bottom line: Prattle’s correctly projected sentiment score of yesterday’s FOMC statement gave traders the ability to position themselves with almost complete certainty and profit from the resulting market movement.
*Raw scores represent the tone of a communication compared to the average of all communications. Residual scores represent the tone of a communication compared to the rolling, 12-month average for that individual communication type or speaker.