Evan Schnidman on Prattle*
When the Fed first started to talk, it didn’t make much sense–on purpose. Former Fed chairman Alan Greenspan was a master of this intentional unintelligibility, and his rhetoric, known as “Fedspeak,” was specifically designed to shroud the central bank’s moves in mystery.
In this information starved era, analysts–“Fed watchers”–were desperate, looking to the most innocuous details to support their monetary policy projections. Strange as it may sound, even the width of Greenspan’s briefcase was considered a source of insight by Fed watchers. But this opacity would not last. In the twilight of his tenure, Greenspan began favoring clarity over convolution, and his successors have continued this trend towards transparency.
Unfortunately, Fed watching hasn’t progressed nearly as much as the Fed has. When the Fed talks now, many analysts still look to the minor details–rather than major themes–as the crux of their qualitative conclusions. While not all qualitative central bank analysts fall prey to this error–our colleagues at LH Meyer are a perfect example of qualitative analysis done right–the vast majority do, and Prattle was born out of frustration with these practices.
Rather than hinging our assessments on a few words or a phrases, Prattle evaluates the entire scope of central bank communications using an expertly trained, domain-specific language interpreting program. Built to treat the Fed’s words like data, this methodology produces the objective, comprehensive and quantitative assessments of central bank communications that the Fed watching world has been waiting for.
*Video by Basis Technology