Welcome to The Signal’s “Macrocast.” Each week, we provide analysis and forecasting on the most important upcoming central bank communications.
Forecast: Likely to (continue to) signal an impending hike
Analysis: Kashkari, Mester, and Lacker are speaking on the 31st, 1st, and 2nd respectively. While all of these speakers have a history of hawkishness*, they’ve been relatively moderate of late. We expect that all three, especially Mester and Lacker, will return to their hawkish ways this week, adding to the chorus of Fed speakers pointing to an impending hike. As mentioned above, Rosengren is also speaking in Beijing this week, and he may take the opportunity to join his colleagues in signalling a rate hike before year-end.
Reserve Bank of Australia
Forecast: Likely to signal dovish
Analysis: The RBA is trending dovish (momentum** -0.68) again, and markets will be watching Guy Debelle, the RBA’s assistant governor, for dovish inclinations in his August 30 speech. Debelle has not spoken publicly since June, but his May and June speeches were consistently hawkish, and his current momentum score is 0.77. Should Debelle score dovish–or even moderate–it could be a signal of another RBA cut.
European Central Bank
Forecast: Likely to (continue to) trend hawkish
Analysis: On September 2, Benoit Coeure and Victor Constancio are speaking at a conference on “The Optimal Size of the Financial Sector.” Although both speeches will likely focus on regulation, it would not be surprising to see them assume a hawkish tone and contribute to the ECB’s recent, rising sentiment (momentum 0.27). Also, Executive Board Member Peter Praet (along with the Boston Fed’s Eric Rosengren) is speaking at a conference in Beijing about monetary policy in China, but, given the conference topic, we don’t expect to see any bold ECB policy statements coming out of that speech.
Bank of Turkey
Forecast: Minutes to signal if rate cuts will continue
Analysis: On Wednesday, the Bank of Turkey will release the minutes from its policy meeting last week. The bank decided to cut last week–by 25bps–and its sentiment is trending dovish. Will the cuts continue? These minutes should bring clarity.
Bank of Brazil
Forecast: Likely to hold rates
Analysis: The Bank of Brazil will likely hold at its policy meeting on Wednesday. While it’s been, for the most part, radio silence, the bank has been trending significantly hawkish (momentum 1.36), even in the face of a rising real, suggesting a rate hold.
Bank of Israel
Forecast: Likely to hold rates
Analysis: Despite a dovish set of recent minutes (residual score -1.08), the Bank of Israel’s momentum remains positive (0.28), so we expect they will hold rates yet again.
The Signal Team
* Prattle’s models are based on the historical relationship between central bank language and market reaction, which is used as 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.
** 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.