What The World's Central Banks Will Announce This Week

Prattle is a text analysis company that uses proprietary algorithms to provide weekly research on central bank communications. This is a reprinted version of their Macrocast, originally published on their blog.

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.

Federal Reserve

Forecast: Speeches will point to a hike Analysis: With eight speeches scheduled, Fed policymakers are less active than last week–but still very vocal. We expect that Lacker, Fischer, Mester, and George will all speak specifically about monetary policy and will all contend for a rate hike in the very near future. While the Fed’s not trending* particularly hawkish (momentum** 0.11) at the moment, we expect the hawks will begin making their case now so that a December hike becomes a foregone conclusion.

Bank of England

Forecast: Chatter points to no more stimulus
Analysis: Deputy Governor Broadbent is the only speaker this week (October 5), and we expect his speech will fall in line with the hawkish chatter we have seen from the BOE lately. The bank is in a holding pattern as it waits for the countervailing forces of Brexit and the August stimulus measures to play out.

European Central Bank

Forecast: Speeches to indicate neutral to slightly hawkish policy stance
Analysis: Although Mersch (October 3) and Praet (October 4) are giving speeches this week, Draghi’s comments (October 8) at the IMF/World Bank meeting are likely to be the biggest market mover. For context, Draghi is trending just above neutral (momentum 0.26)…as is the ECB (momentum 0.18).

Reserve Bank of Australia

Forecast: Likely to cut by 25bps on October 4
Analysis: With momentum at -1.02 and overall sentiment diving–below the level it was before each of the last two rate cuts–the RBA will likely cut. One caveat though: the bank might not want its first move under new leadership to be pushing rates to another all-time low when housing prices are still rising. While a cut is highly likely, it is possible that Governor Lowe will hold off at this meeting and strongly signal a cut in November.

Reserve Bank of India

Forecast: Likely to hold rates
Analysis: With a new, committee based structure in place, the RBI meeting this week (October 4) marks a historic occasion. This is the first time a rate decision is being made by a group instead of the governor. Given these circumstances and the bank’s relatively neutral trend (momentum 0.06), we expect no policy changes.

Bank of Canada

Forecast: To continue slightly hawkish rhetoric
Analysis: Senior Deputy Governor Carolyn Wilkins is the only speaker this week (October 6), so we do not anticipate any big moves from the BOC. Wilkins (momentum 0.12) will likely reinforce the recent slightly hawkish trend from the BOC (momentum 0.36).

Photo credit: European Central Bank, Flickr