Analyzing Central Bank Policy Tightening Signals

  • Monday, December 4, 2017

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The Most Important Central Bank Releases This Week
central bank communications analytics research

Despite sounding hawkish during the fall of 2017, both the RBA and BOC are likely to hold rates to close out the year. The RBA is likely to signal an early 2018 hike, while the BOC may take a slightly more cautious tack by suggesting another rate hike will only come if strengthening labor market conditions produce commensurate inflation. The fact that only one ECB policymaker is set to speak this week suggests that the bank feels comfortable with how it has signaled 2018 tapering plans. The BOE’s meeting minutes may shed light on why policymakers elected to hike rates while essentially negating the hike with dovish rhetoric. Perhaps the most interesting G-10 central bank this week is the Swedish Riksbank. Five policymakers are slated to speak, perhaps signalling that strengthening economic conditions coupled with ECB tapering has emboldened them to move toward tighter policy as well.

The Fed is silent ahead of a likely rate hike next week, but it is worth note that St. Louis Fed President Jim Bullard raised a red flag on Friday about the possibility of an inverting yield curve, especially if the Fed has to accelerate rate hikes to combat inflation driven by a proposed short-term tax cut. The Fed remains likely to hike rates next week, but Bullard’s caution about the yield curve is worth noting since such an inversion is an obvious harbinger of recession.

This is an abbreviated version of the Cyborg Analyst. The full weekly report contains detailed analysis based on Prattle’s central bank data. Subscribe here.

The Prattle Team

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