Welcome to The Signal’s “Macrocast.” Each week, we provide analysis and forecasting on the most important upcoming central bank communications.
Forecast: Lots of chatter, most of it hawkish
Analysis: The Fed has a busy week ahead: there are 16 speeches scheduled, and while most will focus on community banking and regulatory issues, we expect they will also touch on monetary policy (especially the hawks). Mester’s speech on September 28 will probably be the most hawkish this week, but Yellen’s testimony before the House (same day) will likely be the biggest market-mover. Yellen’s remarks the next day will also garner market attention. Despite a recent dip in trend* (momentum** -0.03), we expect this week will begin a hawkish march toward a December hike.
European Central Bank
Forecast: Draghi to provide update on ECB monetary policy status
Analysis: The ECB also has a week stacked with key communications. Containing the most significant update on the state of the Euro-area economy, the testimony and two speeches given by Mario Draghi (momentum 0.11) will likely stand out from the crowd and strike a mildly hawkish tone.
Bank of Japan
Forecast: Kuroda to clarify BOJ policy
Analysis: Last week’s communications painted a muddled picture of policy, but this week’s—with the combination of Kuroda’s speeches on September 26 and 29 and a minutes release on September 26—should hopefully bring some clarity. The bank’s momentum made a turn for the hawkish last week (0.50), but we expect Kuroda to take the edge off, assuming a more neutral to dovish tone.
Bank of England
Forecast: To emphasize UK economy’s resilience
Analysis: It’s a quiet week in the UK, and Haldane, the only scheduled speaker (on September 27), will likely talk up the post-Brexit UK economy and earn a modestly hawkish score.
Reserve Bank of Australia
Forecast: Dovish signals could point to another cut
Analysis: Although Assistant Governor Malcolm Edey’s September 27 speech—his first since May—will not be hugely indicative of policy direction, any additional comments pointing toward further dovishness could suggest momentum is building for another RBA rate cut before year-end.
Bank of Canada
Forecast: Likely to trend hawkish
Analysis: After delivering a somewhat hawkish (residual 0.39) speech just last week, Governor Poloz (speaking September 27) will likely reinforce the hawkish trend currently developing from the BOC (momentum 0.22).
Swiss National Bank
Forecast: To clarify sentiment trend
Analysis: In the context of a declining trend from the SNB (momentum -0.06), Chairman Thomas Jordan’s September 29 speech should clarify if this trend is likely to persist.
Bank of Turkey
Forecast: September 29 minutes release to signal rate path
Analysis: This week’s minutes release should hint at whether Turkish central bankers intend to continue rate cuts despite their slightly hawkish momentum (0.10).
Banco de Mexico
Forecast: Likely to hold rates, but issue hawkish statement
Analysis: A weak peso could point to a rate hike at the Bank of Mexico’s policy meeting this week (September 29), but even with a somewhat hawkish momentum (0.18), the combination of limited communications and no clear signal from policymakers suggest a hold is slightly more likely than a hike. We expect hawkish sentiment coupled with a hold, but in the less likely case of a hike, the statement will veer less hawkish.
Bank of Israel
Forecast: Likely to hold rates
Analysis: Declining sentiment (momentum -1.14) and a strong shekel suggest the Bank of Israel is closer to stimulus than tightening, but we expect this week’s meeting (September 26) to once again result in dovish talk and steady policy as Israel waits on Fed tightening.
Bank of Taiwan
Forecast: Likely to hold rates
Analysis: Despite infrequent communications and declining sentiment, the still slightly hawkish (momentum 0.19) Bank of Taiwan will likely hold rates and issue a moderate statement this week (September 29) after cutting rates in June.
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.
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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