Welcome to Prattle’s “Macrocast.” Each week, we provide analysis and forecasting on the most important upcoming central bank communications.
Federal Reserve
Forecast: Likely to present diverse views, but no March hike signal
Analysis: Fed tone has been almost perfectly neutral* (momentum** -0.03), so the nine policymakers speaking this week will have to present a unified hawkish message if they intend to signal a March rate hike. We expect a more mixed set of speeches, the most important of which will be on Friday, March 3 as Fischer, Evans, Lacker, and Yellen are all slated to speak on issues directly related to monetary policy.
European Central Bank
Forecast: Lautenschlager likely to signal neutral or slightly dovish ECB trend
Analysis: The only scheduled speech this week comes from Sabine Lautenschlager (momentum 0.10), who has a history of speaking in near lockstep with the ECB as a whole (momentum 0.18). Considering recent ECB trend shifting less hawkish and Lautenschlager’s February 18 speech scoring dovish (residual -0.74), her speech this week is likely to sound neutral to slightly dovish.
Bank of Japan
Forecast: Kuwabara and Sato unlikely to discuss monetary policy
Analysis: The only scheduled BOJ speeches this week are from usually quiet policymakers, Kuwabara and Sato. It is unlikely that either speaker will discuss monetary policy or deviate from the BOJ’s current neutral momentum (0.09).
Bank of Canada
Forecast: Likely to hold rates, issue a modestly hawkish statement on March 1
Analysis: After Deputy Governor Schembri indicated that rates were “sufficiently stimulative” and that consensus on this matter was “relatively straightforward”, it would be a shock for the BOC to change course and engage in further stimulus. The BOC has been silent since Schembri’s February 9 remarks, but the hawkish tone of his statement (residual 1.53) suggests a shift away from the bank’s recent dovish trend. The BOC will likely reinforce this hawkish shift at this week’s meeting.
Bank of Israel
Forecast: Likely to hold rates on February 27
Analysis: Although the Bank of Israel has been trending hawkish recently (momentum 0.67), the dovish Monetary Policy Report released on February 22 (residual -0.96) highlights the recent tension in the Israeli economy. While the strong shekel has curbed exports and inflation remains below target, 3.8% GDP growth does not warrant monetary stimulus. Policymakers have also indicated a strong aversion to negative rates. This tension—along with last week’s currency intervention intended to reduce the shekel’s growth—suggests that the Bank of Israel is unlikely to alter rates on February 27.
Swedish Riksbank
Forecast: Minutes released on March 1 likely to be slightly dovish
Analysis: The Riksbank’s February 15 policy statement was fairly neutral (residual -0.08), but also represented the bank’s most dovish tone since early 2016. The minutes are likely to reflect this slightly more dovish posture.
Norges Bank
Forecast: Olsen likely to sound modestly hawkish
Analysis: Oystein Olsen is likely to touch on the monetary policy outlook in his two speeches on March 1 and 2. After ending 2016 on a dovish note, recent communications have raised the Norges Bank’s momentum to 0.15, signaling that further rate cuts are unlikely. Olsen’s momentum of 0.35 suggests that this week he will likely reinforce this more stable, slightly hawkish posture.
Swiss National Bank
Forecast: Zurbrugg unlikely to discuss monetary policy in February 27 speech
Analysis: The SNB has been extremely quiet of late, making it unlikely that Fritz Zurbrugg’s speech on February 27 will signal any substantial policy shift. The speech promises to generally avoid monetary policy and instead focus on the value of cash banknotes in a digital world.
Central Bank of Turkey
Forecast: Minutes likely to be hawkish on March 1
Analysis: The Bank of Turkey has been increasingly hawkish (momentum 0.25) since early January. The minutes released on March 1 will likely reinforce this trend as the bank looks to explain its recent rate hike and set the stage for further hikes. With the lira gaining strength over the last six weeks, hawkish minutes could push the currency into an even stronger position.
The Prattle Team
* Prattle’s models are based on the historical relationship between central bank language and market reaction, which is used as the 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. Aggregate trend is the overall sentiment of the bank calculated using a LOESS fitting of trend using a 12-month window.
** 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. Momentum is the average of the last ten residual scores.
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.
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