Word Search Shows Emerging-Market Central Banks Most Dovish in Decade

(Bloomberg) -- A robot-driven, lexical trawl through thousands of monetary policy reports across emerging markets shows the language of doves is everywhere.

Bank of America’s Emerging Monetary Mood Indicator is at its least hawkish level since 2009. In particular, BofA singles out the change in tone in Russia, which meets on rates this week, as well as South Africa and Mexico.

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“Dovish central banks are supportive of emerging-market rates and equities, but cap currency returns, unless the dollar starts to weaken,” wrote BofA’s David Hauner, Eli Kobzev and Kate Pavlovich in a note. “Emerging-market real yields remain decent.”

The index, which tallies the frequency of hawkish language (tighten, bump up, augment) against accommodative words (shave and slice), shows the Indian central bank’s tilt toward policy easing is the strongest among its peers, while the Czech regulator is the most hawkish.

But BofA analysts slot in a strong caveat: While the scan points to the possible direction of sentiment, “it definitely cannot be used as a simplistic leading indicator for the swaps market of the base rate,” they said.

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