DrobnyGlobal, a financial research and consulting firm, used Prattle’s data on central bank sentiment to compare recent episodes of market volatility to the “taper tantrum” in fixed income markets following the Fed’s decision to scale back its quantitative easing program in 2013.
As Droby notes, evaluating the degree of hawkishness or dovishness of central bank communications with traditional methods is “highly subjective.” To avoid many of the pitfalls involved in the traditional, human analysis of these texts, Drobny uses Prattle’s quantitative measures of central bank sentiment..
DrobnyGlobal uses Prattle’s increasingly hawkish indicators of Fed and ECB sentiment in recent months—together with crowded long positioning across the yield curve and rising inflation expectations—to conclude that there is a “higher risk of a euro-driven taper tantrum.”
The study emphasizes the value of Prattle’s objective measure of central bank sentiment, noting that “as more transparency and a forecast-based inflation targeting approach have been adopted, discretionary views amongst speakers have converged somewhat making communications a fairly good descriptive tool for assessing a central bank’s monetary policy rule in real-time.”
DrobnyGlobal joins a growing number of established voices finding deep value in Prattle’s data.