LIVE MARKETS-UBS using AI to track central bankers' tone

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UBS USING AI TO TRACK CENBANK POLICYMAKERS' TONE

It's a central bank-heavy week. Market watchers will be assessing the tone that policymakers strike as much as the numbers, and over at UBS, the team is using AI for this end.

A team of economists is using a new large language model based tracker to measure policy tone for the Fed, ECB, and BOJ.

They say the tool analyses "policy-relevant remarks in speeches, interviews and press conferences", giving them a score based on how hawkish or dovish they are.

For the Fed, the tone is in a holding pattern, says UBS.

"Tone is no longer falling deeper into dovish territory, but neither is it re-tightening. Laboru tone remains the dominant driver and is stabilizing, while growth language has firmed at the margin and inflation commentary remains steady in the absence of fresh data."

At the ECB the tone is stabilising just below neutral, with recent comms focusing on the topic of growth. This has put a stop to an earlier dovish drift, says UBS, while inflation commentary is stable.

"Speaker dispersion has continued to narrow, leaving most Governing Council members clustered in mildly dovish territory."

Finally, at the BOJ, hawkish momentum continues with little internal resistance, says UBS.

"Language around inflation, growth and policy has strengthened in tandem, and this shift has not been offset elsewhere in the narrative."

The board messaging is also unusually one-sided by BoJ's standards, with no counter-voices in Q4.

(Lucy Raitano)

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