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Media often captures sentiments correctly ahead of monetary policy: RBI study

Media often captures the sentiments correctly ahead of monetary coverage bulletins by the central financial institution, says a study by the Reserve Bank of India officers.

Several media organizations, primarily based on specialists’ evaluation and motion of key macroeconomic variables within the fast previous, undertaking coverage motion ahead of the precise monetary coverage announcement by the central financial institution.

“It is found that (media) sentiment concentration was directionally in sync with the policy rate decision except on few occasions,” said the article on ‘Policy rate expectations in media,’ written by Geetha Giddi and Shweta Kumari, Big Data Analytics Division, Department of Statistics and Information Management (DSIM), RBI.

The views expressed on this article are these of the authors and don’t characterize the views of the RBI, the article said.

It additional said that with rising significance of central financial institution communication in market economies, the function of digital and print media has gained significance.

“Media disseminates, explains and interprets news to the general public, and also conveys concerns, perceptions and opinions of various economic agents to the policy makers, either directly or indirectly,” it added.

Traditionally, central banks have used numerous forward-looking surveys to elicit suggestions on a variety of macro-economic and monetary variables from companies, households and professionals to bridge information gaps and generate excessive frequency information for coverage inputs.

“With deeper penetration of internet, new sources (newsfeeds, online portals, social media platforms) are transmitting news to the market as well as to the public, generating micro voluminous data at high frequency,” the article said.

The evaluation reveals that “for most of the time period under consideration, sentiment was noticeably concentrated in one of the sentiment classes (increase/decrease/neutral), indicating media’s overall tilt towards a particular rate action”.

News articles used on this study have been sourced from a media intelligence firm. Daily news associated to coverage rate from April 2015 to December 2019 was culled out from the source.

April 2015 was chosen as the place to begin in view of the beginning of the versatile inflation concentrating on (FIT) regime in India, the article said.

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