Monday, May 12, 2014

RBA Monetary Policy Statements - Last three months

Been playing around with VBA in excel trying to create word clouds and the like.

One of the areas I have been focusing on is the Monetary Policy releases from the RBA. Trying to detect changes in tone etc to see if I can accurately predict the next move in interest rates from the language.

Couple of interesting things from the last three months.

1. The RBA seems to be focusing on more local issues now...in the May RBA release, there is no mention of another country except China, as opposed to March and April which mentioned the Euro Zone and the US.

2. A lot more present tense use. Less waiting for something to happen and now more is happening.

3. Number of words in the statements are increasing. From 428 words in March to 486 in May. Trying to justify it's lack of movement perhaps

4. "Fragile" has disappeared from the word list and "Strong" has now appeared

5. Using a very basic weighting system assigned to each word to reflect a "positive" value as opposed to a negative value, I have the language improving over the last few months, from a weighting of 21 in March to 33 in May.

So based on this, it certainly does seem that the RBA will increase rates before decreasing hem. But it is looking inward at the moment, probably because of the budget tomorrow night. Less about the externals, more about the internals at this time.

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