TOPIC OF THE WEEK: Hawk talk, no walk?

CAUCASUS / CENTRAL ASIA - Report 06 Nov 2026 by Ivan Tchakarov

I employ a LLM to look at and analyze 167 rates decisions in Armenia, Azerbaijan, Georgia, Uzbekistan, Tajikistan and Kyrgyzstan since Jan 2023. I first score each policy statement on three parameters, including inflation assessment, inflation risks and policy guidance, and then combine all statements over 2023-2026 to derive a Communication Index (CI) for each central bank in the sample.

The quantitative CI allows me to construct a heatmap to compare individual policy statements over time and across banks. Over the last 12 months, the country ranking puts Kyrgyzstan, Georgia and Uzbekistan at the more hawkish end of the spectrum, with Armenia and Azerbaijan expressing more caution. However, if we look over longer policy cycles, Armenia and Georgia have moved from dovish average language in 2023/2024 to hawkish language in 2025/2026. These two countries, along with Kyrgyzstan, have seen the most pronounced increased in the hawkishness of their communication as measured by the CI index. It is then probably not surprising that the central banks of those three economies have hiked so far in 2026. More generally, the heatmap reveals a move towards more hawkish communication by CCA central banks over the last couple of years.

The exercise is useful for tracking policy communication, although it appears less productive in predicting future interest rate moves. For example, in a test whether a given policy statement correctly predicts the next decision, the CI gets it right only 39 percent of the time vs 72 percent for an agnostic rule that predicts no change in the policy rate. The predictive power does get better if we consider forecasting over the subsequent two or three rate decisions, but it is still the case that the CI is much more promising as an early-warning indicator than as a direct predictor of the next interest rate decision. This can be ascribed either to the simple nature of the constructed index, which would be my fault, or, at least to some degree, to the still less refined communication strategy of the regional banks.

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