Fed, BOJ, RBA Analytics Hint at Next Moves

  • Monday, April 17, 2017

Welcome to Prattle’s “Macrocast.” Using our proprietary central bank analytics, we provide analysis and forecasting on the market-moving releases in the week ahead.

central bank communications analytics research

U.S. Federal Reserve
Forecast: Fed chatter likely to remain neutral
Analysis: Speeches this week from Fischer, George, Rosengren, Powell, and Kashkari are likely to continue the Fed’s recent neutral* trend (momentum** 0.06). Fischer’s modestly hawkish position since the December rate hike makes his the speech to watch this week. Any deviation into dovish territory suggests the recent decline in Fed sentiment may signal a slower path of rate hikes than the Fed projected at the March FOMC meeting.

European Central Bank
Forecast: Cœuré and Praet likely to maintain neutral tone
Analysis: ECB tone has been just on the hawkish side of neutral recently (momentum 0.10), suggesting that both Benoît Cœuré and Peter Praet are likely to continue this trend by sounding neutral when speaking on April 19.

Bank of Japan
Forecast: Kuroda, Financial System Report likely to continue hawkish trend
Analysis: Along with a series of reports and survey results, the only BOJ speaker this week is Governor Kuroda. Although he is speaking before the financial system report is published, Kuroda is likely to provide an upbeat tone as conditions continue to improve and the BOJ trends increasingly hawkish (momentum 0.37).

central bank communications analytics research

Reserve Bank of Australia
Forecast: Minutes likely to be neutral
Analysis: The RBA’s March monetary policy statement was the least dovish statement in more than a year and resulted in meeting minutes carrying a neutral score (-0.02). The April monetary policy statement was only marginally more dovish, so the resulting minutes released on April 17 are likely to score similarly neutral.

Bank of Canada
Forecast: BOC likely to remain neutral, possibly slightly hawkish
Analysis: Carolyn Wilkins is likely to sound modestly hawkish in her remarks on April 18, continuing the BOC’s recent modestly hawkish rebound (momentum 0.08). Although Wilkins is an infrequent speaker, declining concerns about U.S. trade relations should allow her to provide a slightly more optimistic view based on her trade expertise.

The Prattle Team

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* 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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