Access daily predictions of month-over-month US Core and Headline inflation rates from the analysis of news and macroeconomic indicators.
RavenPack Inflation Nowcasting indicators leverage machine learning models to deliver a daily prediction of Core CPI and Headline CPI: a Backcast which estimates, on a daily basis, the inflation value of the previous month until official figures are released, and a Nowcast of inflation figures expected to be effective by the end of the month.
The value and evolution of these indicators can help quantitative and discretionary investors:
Updated daily until official figures are released, backcasting indicators deliver a window of up to 2 weeks of advanced insights over inflation for the previous month. This notice helps prepare for inflation surprises by adjusting portfolio risk exposure, and even trade any market reaction.
A timely assessment of the current state of inflation can improve the returns of asset allocation strategies, particularly during periods of unstable inflation, or when investors target specific volatility, as demonstrated by recent quantitative results.
Each indicator provides information about the level of inflation uncertainty, and expected value:
Backcasts and nowcasts are the outcome of a multi-step process that includes:
RavenPack analyzes textual content from high-quality sources to identify events that are relevant to the US economy. Documents considered include articles, news flash, tabular materials, and transcripts.
Additional filters ensure the data remains focused on contemporary observations, and relevant organizations. Variables used to predict inflation identify the most important and influential factors likely to affect prices in the future, from monetary and fiscal policy, to global economic conditions, supply and demand factors, and other economic indicators.
For each event identified, RavenPack uses sentiment analysis approaches to compute a score by matching stories usually categorized by financial experts as having a positive or negative financial or economic impact.
Over 30 predictors are used in the model with RavenPack variables accounting for at least 50% of them.
The indicator delivers a distribution curve that enables users to compute risk and uncertainty around inflation projections, as well as pre-computed probabilities of observing inflation within specific classes (<0%, 0-0.166%, 0.166-0.333%, >0.333% for month-to-month inflation).
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