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Quant Signals: Central Bank Sentiment Indicators

Quant Signals: Central Bank Sentiment Indicators

Our updated state-of-the-art Central Bank Sentiment indicators are flagging important changes in communication dynamics since the beginning of the year. We recently upgraded our sentiment measurement to a more fine-tuned and nuanced NLP model that effectively captures the meaning of Central Banker rhetoric and here share key findings.

Sentiment Nugget: Central Bank Divergence Into Year-End

Sentiment Nugget: Central Bank Divergence Into Year-End

Into year-end we have noted a number of key shifts in what Central Bank language is actually telling us from a quantitative point of view. We regularly track and update our measure of positivity/negativity of Bank language contained in statements, outlooks and speeches on a scale of -1 to +1 in our DataHub for premium subscribers. There you can access full histories and dig deeper into the underlying drivers. Note – our sentiment tracker is a moving average rolling over 10 instances of Bank communication. For each speech, statement, policy statement etc, we calculate sentiment via domain-specific language and terms used by policymakers. Data above 0 indicates more positive sentiment, whilst data below 0 indicates negative sentiment. Chart 1: An uplift in BoJ sentiment stands out – the most positive since April 2015 Net positive sentiment from the BoJ, between its statements, speeches and policy outlooks, is the strongest it has been since April 2015 on our measure at +0.14. That uplift is being led by consistent positivity in the policy statements, which have come in above the moving average since mid-2021, but acutely taken off into H2 of 2023. Of the three central banks we cover – all of which are directly comparable – the BoJ is, in relative terms, also far more positive. Chart 2: The ECB has also bounced off of the lows We also highlighted in our November update that ECB sentiment had reached its most negative point at any time on our measure (going back […]

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Demographics Watch – A Public Debt Timebomb

Demographics Watch – A Public Debt Timebomb

Welcome to a new Demographics Watch! We will take a deep dive into public debt and how it’s related to birth rates and ageing population. If you want to go even deeper into our numbers, we have set up a Demographics page on our Datahub, where you can play around with the numbers yourself. It’s for Premium users only – but you can try it out for free with a 14-day trial.   Demographics Watch – A Public Debt Timebomb   In our first Demographics Watch article, we introduced ‘The Problem Index’ – a measure of a country’s ability to deal with an ageing population. Weighing the pull and push forces of growing dependency (an increasing older population relying on its diminishing working age population) and migration (as one potential way to fill this gap), we outlined the countries most vulnerable to a continuation, or worsening of current demographic trends. Unsurprisingly, it didn’t make for comfortable reading anywhere, but the index suggested two major problem regions – Eastern and Southern Europe, and East Asia.    We also highlighted that the Problem Index would serve as the groundwork on which we’d build. Today, we want to expand upon the pure demographic trends explored by considering the second order economic impacts captured by the Problem Index – namely, an ageing population’s impact on a country’s public debt.    Before we delve into the forecasts and data itself, a brief 101. The theory itself is relatively straightforward: ageing populations – people living longer […]

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